Canadian cable operators have been quietly trying for years to launch Internet protocol television in a bid to keep customers out of the grips of their telephone company competitors. But questions are now surfacing about their ability to make the tricky technological shift from cable to IPTV.
Montreal-based Cogeco Cable Inc. said last week it was writing off an investment of $32-million as it scrapped plans for an IPTV initiative intended to deliver video signals over a data network rather than through traditional cable.
"We came to the conclusion that the intelligence to make it work was simply too complex. That probably we were tackling an idea ahead of its time," Cogeco's chief executive Louis Audet told analysts last week, explaining the company's decision to press pause on efforts to create a new IPTV platform.
In the meantime, he said, the company will enhance its cable service by offering customers in Ontario and Quebec TiVo (the pioneer of personal video recorders or PVRs), which it has already rolled out to its U.S. Atlantic Broadband subscribers.
Although Canada's largest telecommunications providers now offer more or less the same product line-up, with the three largest players all selling wireless, Internet, home phone and television services, the technology they use to get there is not exactly the same.
The Canadian cable industry – including dominant players such as Rogers Communications Inc. and Shaw Communications Inc. – made a big leap with the launch of home telephone services in 2005, using voice-over-Internet protocol technology to take a bite out of the telephone companies' long-standing market.
Phone companies such as BCE Inc. and Telus Corp. soon countered with their own attack on the cablecos' legacy business, devoting significant capital to building the infrastructure needed to launch IPTV, which allowed them to deliver television services over their Internet networks.
BCE and Telus already operated satellite services, but this got them in the TV game in a bigger way and also offered certain customer-friendly advantages over cable that the telcos have been exploiting more of late. Those included enhanced interoperability between four screens – smartphones, tablets, desktop computers and televisions – more advanced PVR functions and seamless Internet connectivity. (BCE owns 15 per cent of The Globe and Mail.)
Cable companies are anxious to offer those same benefits to their customers, but as Cogeco's move shows, it isn't easy.
"The systems integration and vendor support required is enormous," Canaccord Genuity head of research Dvai Ghose said in an interview Tuesday.
Nonetheless, some are sticking with it. Rogers said in February it plans to have an IPTV product on the market in 2015 and on Tuesday it said it remains committed to that goal.
"We think delivering the best experience for our customers requires the open-ended innovation available via IP Video, instead of an off-the-shelf, hybrid solution like TiVo," spokeswoman Jennifer Kett said in an e-mail. "Rogers remains committed to launching its standards-based TV over IP. We are continuing to make great strides in its development."
Mr. Ghose said that there are many benefits to moving to IPTV, which can be a more cost-efficient platform and offer customers key conveniences, but said he believes Rogers will eventually adopt an intermediate solution as Cogeco is doing with the TiVo offering.
However, Barclays Capital analyst Phillip Huang argued this week Rogers has a key advantage as it is participating in a global community of more than 150 cable operators to develop standardized software for a next-generation cable platform.
Ms. Kett confirmed Tuesday that Rogers is a licensee of RDK Management LLC, a joint venture led by U.S. cable giants Comcast Corp. and Time Warner Cable Inc., and takes part in an RDK working group.
"The [RDK software] is expected to cut set-top box development time from two to three years to 10 months," Mr. Huang said, adding he believes Rogers remains on track to launch its first generation of IP set-top boxes in late 2015.
A spokesman for Shaw said the company is "looking at IPTV among other innovations," but said he had no further update Tuesday.