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David and Goliath
David and Goliath

Cover story

In telecom, a new battle for Quebec Add to ...

Pierre Karl Péladeau sits beneath a bronze bust of his father as the skyline of Old Montreal gleams outside the towering windows of his enormous corner office.

It's a regal setting that befits the king of Quebec's French-language media. As chief executive officer of Quebecor , founded by his late father Pierre, Mr. Péladeau reigns over an empire that includes the continent's largest French-language broadcaster, as well as Vidéotron Ltée, the dominating force in Quebec's cable television and broadband Internet markets and a major player in its home phone sector.

Mr. Péladeau now has his eye on an even bigger slice of his province's telecom revenues. In September, he will ignite a battle for Quebec's cellphone market, as Vidéotron becomes the first major Canadian cable company to launch its own wireless network since Rogers Communications Inc. did so 25 years ago.

For Mr. Péladeau, the battle is another chance to take on the much larger Bell Canada, the dominant phone company in Quebec. For the rest of Canada, it's a preview of the coming regional wars that will play out between phone and cable companies - a conflict that will drive down prices for telecom services across the country and redraw the national telecom landscape.

Driving the clash is the growing ability of both cable and phone companies to offer all four essential products that home users want - television, high-speed Internet, home phone and cellphone service. As the differences between various providers shrinks, the fight for customers is set to grow more vicious.

Nowhere will the battle be more fierce than in Quebec, where Vidéotron - which operates only in the province - and Bell Canada, a Montreal-based company that derives roughly a third of its wireless revenue from Quebec, will be going head to head. Neither can afford to lose.

Adding drama to the conflict is the cultural tension between the two. Executives at Quebecor and Vidéotron stress time and time again that they are a Quebec company - the implication being that archrival Bell is an outsider that just happens to have set up shop in Montreal 130 years ago.

In his office, 19 floors above the bustling Rue St-Jacques in Montreal, Mr. Péladeau's confidence is obvious as he deflects a question to his key lieutenant, Robert Dépatie, who heads his firm's Vidéotron division. The two executives were the ones who in 2005 unleashed a campaign to steal home phone customers away from Bell. In just three years, Vidéotron attracted 600,000 subscribers to its new service.

Now the query isthis: Are they looking forward to Bell's response when they try to make similar inroads by launching a wireless network?

Mr. Péladeau, eyeing his colleague with a mischievous grin, leans back and issues a stern directive. "Say it. We are."

Mr. Dépatie echoes his boss: "We are."

The fight for Quebec is officially on.

Angling for the 'quad play'

Both cable companies and phone companies are now struggling to "own the home" - in other words, they want to shut out rivals and become the sole supplier of all the paid telecom services flowing into a consumer's house.

The reason is simple: When a household takes all of its services from one provider, it becomes a more lucrative and more stable customer, one less likely to switch to another company.

To win market share, both cable and phone companies have made a practice of bundling their offerings and giving big discounts to customers who agree to take more than a single product. The goal of offering the full "quad play" of television, home phone, wireless and Internet service is more difficult than it sounds.

While Rogers has been able to offer the quad play in key markets in Ontario, other telecom companies have always had a weak link in their bundled packages. Phone companies, for instance, provided only limited television options - such as satellite TV, which tends to flicker in bad weather - while regional cable companies like Vidéotron didn't have their own wireless service, and so could only resell service from national carriers like Rogers.

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  • Quebecor Inc
  • Updated December 15 4:46 PM EST. Delayed by at least 15 minutes.

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