While slowly building its Ontario business, Toronto-based television and Internet startup VMedia Inc. is expanding its service to three new provinces.
After a launch in Quebec at the beginning of June, the company is now also offering its home Internet, telephone and television services in major cities in Alberta and British Columbia.
VMedia buys wholesale access to broadband services from large established players and uses a proprietary set-top box it developed to deliver IPTV (Internet protocol television) over high-speed Internet. It also negotiates access to television programming through an industry group for small cable companies.
It launched in Ontario in 2013 and now has almost 20,000 customers, according to George Burger, co-founder and adviser to the company.
"That's been hard fought," he added in an interview, explaining that VMedia has been a casualty of the dominant cable and telephone companies in the region – Rogers Communications Inc. and BCE Inc. – increasing their own marketing efforts against each other in recent years.
Nonetheless, the startup is now "breaking even," Mr. Burger said, and has finally been able to spend some money on marketing (with some ads popping up on public transit) as well as its move into new markets.
The most expensive part of the expansion was setting up a dedicated sales team and call centre in Montreal to serve the francophone audience, he said. Moving into Alberta and B.C. was more straightforward as the company did not have to revamp its entire offering.
When new customers sign up, the company simply sends them the set-top box by mail and the wholesale broadband provider (for example Rogers or BCE or one of the providers in Western Canada) is responsible for connecting the home to the Internet.
VMedia runs its operations out of Toronto, but has an office that handles provisioning (which includes negotiations with carriers that sell wholesale Internet service to the company) in Russia and a call centre for customer support in India. Both of those offices were established when employees who originally worked in Toronto relocated, Mr. Burger said.
The Toronto startup is one of only a small number of players that offer a "bundle" of Internet, television and home phone services in competition with the established TV and phone companies. Its model requires licences from the Canadian Radio-television and Telecommunications Commission (CRTC) to distribute television services.
It also relies on being able to eke out at least a small margin of profit between the attractively low prices it charges customers and the fees it pays for television content and wholesale Internet access.
Mr. Burger said he hopes that a current CRTC process reviewing the cost of wholesale access will yield positive results (i.e. lower wholesale rates) for his business. He also believes the incumbent Internet and TV providers will eventually raise their prices, which will give VMedia room to do the same.
Finally, he lauded the federal government's recent move to reject an appeal by BCE against a CRTC ruling that will grant small competitors access to the company's fibre-to-the-home Internet service.
VMedia will not be able to offer that fibre-optic service immediately, but Mr. Burger said the decision was crucial. "It means everything because the alternative is that you have no business in three years. The trend toward fibre – it's inevitable."