Ready early, say telcos

With the ccta backing off its request for a seven-year moratorium on the telcos’ entry into the broadcasting business, the pressure is on for the crtc to establish the exact time frame of the telcos’ proposed ‘natural transition period’ into broadcasting, before making recommendations for policy changes to the government next month.

Coming out the other side of nine hours of testimony from Stentor at the crtc Information Highway Public Hearings in Hull, Que., it is evident that if the licensing process weren’t standing in the way, the telcos would be able to begin offering broadcasting services to some portion of cable subscribers early next year.

Under dogged, detailed questions from commissioner David Colville, John MacDonald, Bell Canada’s executive vice-president business development and chief technology officer, and Tom Hope, chief technology officer at Stentor Resource Centre, established that all the equipment the telcos need to get into the broadcasting business is available now, with the exception of the dvc boxes,which will be available in commercial quantities beginning in January 1996.

The Stentor proceedings began early in the afternoon March 16, a day early after the Newfoundland Broadcasting Corporation dropped out of the hearings.

The Bureau of Competition Policy, represented by its director George Addy, took the stage in the morning. The Bureau advocated a funding system for Canadian productions whereby the government would dole out subsidies based on its evaluation of whether the program was a ‘meritorious’ production reflecting Canadian culture.

Colville opened the Stentor session with questions on technology and network issues and continued that theme well into the second day of talks.

After a long period of threshing out the details of the installation of big and small pieces of equipment and how long it would take to build and engage the systems for broadcasting, Colville attempted to sum up the testimony.

‘What I’m hearing you say is that if the telcos are granted interconnectability and can access those cable systems with more than 500mhz of space available, which I’m assuming at least some of the Class 1 cable systems in Canada currently have, you would be in a position to offer up to 90 channels to all cable television subscribers within the territory of that cable system, virtually immediately. Is that a fair assessment?’

‘Yes. In 1996 and early 1997,’ responded MacDonald.

Hope concurred: ‘Subject to the production availability of dvc boxes, yes, early in 1996, or at least within one year of the deployment of those boxes, that would be accurate.’

Rogers Communications and Shaw Communications have already purchased the M-PEG 2 model and Bell has requested purchasing information for this line of set-top boxes, he added.

Hope and MacDonald differ on how long it would take to roll out a broadcasting network into major urban centers. Based on his experience with a similar rollout in the u.k., Hope says customers would begin getting service within seven to eight months.

But MacDonald argues that there are significant issues to be resolved in the mass deployment of the system into urban areas, including the cost involved in upgrading cables, some of which are underground.

‘The aerial plants make it easier to supplement capacity in some areas, but even in the urban areas, given the necessary access to capital and the time it’s going to take to do it, the full deployment to serve a significant number of subscribers would be longer than seven months.

‘We’re talking years to get the associated plants in place to do all of downtown Toronto. I don’t know what the provisioning schedule would be or the availability of construction forces, but I’d put it beyond a two-year time frame (to access 20% of that market.)’

MacDonald estimates that services could be rolled out to about 20,000 homes the first year, with a gradual increase the next year. Those areas chosen for the first wave of installment won’t necessarily be the most concentrated subscriber bases like condominiums and apartments, MacDonald contends.

‘You tend to service broader geographic areas based on the point of architecture you’ll be putting in place. You can’t just go and cherry-pick with these particular networks and service only the condominiums.’

But under questioning from Colville, MacDonald admitted that there will be pressure from the shareholders to quickly establish a revenue stream, and that may mean concentrating some branches of the service in more densely populated areas. The telcos are budgeting $800 to $1,000 per household to upgrade the fibre-optic cables and install base technology necessary to transmit multimedia services.

The number of subscribers reached, and the speed with which the telcos can reach them, depends in part on the commission’s decision on interconnectability (the ability of the telcos to use some of the cable companies’ facilities and lease space on the coaxial lines the cable companies have running past about 95% of Canadian homes).

The network to homes is the core of the problem since the fibre-optic lines linking the telcos’ central offices necessary to transmit a broadcasting service are largely in place.

‘It wouldn’t be unreasonable to expect to see a figure in the 80% range,’ said MacDonald, when asked how much of the telcos’ central offices are interconnected by a fibre network capable of transmitting broadcasting signals now, which will be upgraded in the future to transmit a fully multimedia service.

No coax laid

Coaxial cable is required to reach the consumer and the telcos currently have no coax laid. They are petitioning to share 100mhz of bandwidth of the cablecos’ coaxial network once the set-top box completes the switch from analog to digital video compression transmission early next year. This amount of space would allow them to broadcast about 90 channels of services, which will not be dissimilar to those being offered by the cable companies. Some multimedia services will be tested in the short term, MacDonald says.

‘We would propose to the commission that interconnectability would enable customers to have greater choice at a much earlier stage, negating the need in the short term for outside construction.’

The logistics of allowing the competition access to an infrastructure they’ve spent years building perplexes Canadian Cable Television Association president Richard Stursberg. ‘They want to use our plant to offer services identical to what we’re offering, appropriating our plant to sell cable services and compete with us.’

Formal request

But pressure is mounting on the crtc to open cable services up to competition as soon as possible. On March 14, the government made a formal request to the crtc to develop proposals for fair and equitable access to cable television systems for service providers other than the cablecos themselves.

The commission must file its report, specific to this issue and separate from its public hearings recommendations, by July 31, 1995. A set of policy recommendations from the public hearings will be filed early in May.

At the hearing, Stentor challenged the ccta’s submission that the cablecos are technically unprepared to get into the local phone business. Chief technology officer Hope says the cable companies are already deploying fibre-optic rings, equipment that will facilitate their entry into the telephone service market and allow them to access a portion of the local telephone market valued at $6 billion.

Stursberg admits the cablecos are using some fibre rings, but says he doesn’t know how many they have in place. The issue is more number portability, he says. There’s little chance parts of the business community will switch carriers if they can’t keep the telephone numbers they have now. Plus, the cablecos’ infrastructure isn’t built on targeting the business sector, he says.

‘The vast majority of our fibre plant is not deployed for the purposes of offering business services. We’re in the business of residential services.’

On the issue of funding for Canadian programming, Stentor committed to a levy similar to that of the 5% of base revenue currently imposed on the cable companies. That money is channeled into cable community services. If the telcos are not required to carry a community channel, the same levy would apply, with funds going towards Canadian production.

Sheridan Scott, vice-president of multimedia law and regulation at Bell Canada, says there are several issues to think about before deciding how the Canadian Association of Broadcaster’s proposed 5% to 10% levy on gross revenues for Canadian production would factor into the telcos’ funding contributions.

While Stentor supports a tax on distribution undertakings going directly to producers and says it will agree to whatever levy the crtc imposes, Scott says the crtc needs to make clear what revenues that levy would be attached to, and if and how the money will be divided between different groups within the production industry.

‘I’m imagining you’re not using as your base the publication assets of Maclean Hunter for the cable companies, for example. We want to make clear when we comment, to what base we’re attaching the percentage and what the right percentage is.ÉIf 5% currently goes to the community channel, then you add another 5% to 10% to go to producers, and I guess you have to make sure you get the split right in terms of which goes to the community channel and which goes to the broadcasters.’

As an expression of its commitment to the industry, Stentor has proposed a $50 million package of funds for multimedia content production, research and development, education services, and the construction of access points for the information network in remote communities. From that pool, test beds for multimedia production will be constructed that will give independent producers the chance to develop programs for media like virtual studios, says Scott.

‘We’re going to put the tools in their hands, earmark the training so people can learn how to use multimedia. Money would be made available to them to develop product. They would be in the position to experiment with the new product, or take some of their existing programs and see if they want to make it more interactive.’

The telcos would then provide broadcasters with a second channel to launch their multimedia programs on, giving them an additional subscriber base to draw revenues from, Scott concluded.

The multimedia research and development facilities ‘will give content providers a way to determine how they learn in the new environment,’ says Jocelyn Cote-O’Hara, president of Stentor.