Canadian cable services enjoying strong growth in phone business: StatsCan

Ross Marowits, THE CANADIAN PRESS

MONTREAL - Canada's cable operators chipped away at the dominance of traditional phone providers last year by quadrupling their combined customer base to nearly one million clients, Statistics Canada said Friday.

The industry had some 927,000 clients as of Aug. 31, 2006, up considerably from nearly 212,000 a year earlier when telephony was opened to cable providers.

While cable continued to expand its network, the number of potential customers for telephony services nearly doubled to 8.4 million, from 4.3 million in 2005.

"The industry's ability to quickly attract clients to its telephony services was impressive, compared with other services launched over the past 10 years," said the federal agency report.

For example, it took satellite television services nearly three years to connect 967,000 clients and cable operators more than four years to connect a comparable number of high-speed Internet services.

"Generally, when new services are launched growth is fastest at the beginning so that part of it is not surprise but the magnitude of the jump is a little surprising," Daniel April, chief of telecommunications and broadcasting surveys for Statistics Canada, said in an interview.

Large telecommunications companies around the world, including BCE Inc. (TSX:BCE) and Telus (TSX:T), have been steadily losing telephony customers to cable operators such as Videotron, which is a subsidiary of Quebecor Inc. (TSX:QBR.B), Roger's Communications (TSX:RCI), Shaw Communications (TSX:SJR.A) and Cogeco Cable Inc. (TSX:CCA).

The key component to cable's success in telephony was the launch a decade ago of high-speed Internet, which continues to be a driver for growth of the industry.

Now, cable companies are able to attract customers by offering a bundle of services, including television, Internet, telephony and in some cases wireless.

Bundling is a highly profitable tool for cable companies, said telecommunications analyst Troy Crandall.

"The cable company's primary objective was to get you into the bundle because they know that once you are already taking one or two of the other services they can offer you a discount and they are making margin on the others," the analyst with MacDougall, MacDougall & MacTier said in an interview.

"It's almost a lost leader to get you to take some of the other services as well."

Crandall says the wireline transfer to cable began to slow halfway through 2007, after the CRTC allowed big telecom companies to lower their prices without regulatory approval to compete with cable.

The new rules will enable Telus to better hold onto its customers as Shaw began to roll out its telephony service earlier this year, he said.

Rogers vice-president Phil Hartling said cable companies are seeing their subscriber base grow by providing the reliable choice customers want.

"Anywhere where cable has launched telephony, including Rogers, it's been a really strong success and we're very pleased with the numbers," he said in an interview.

The company has benefited from existing cable customers who are happy to access another service and a new wave of telecommunications clients who prefer an alternative.

During the year, the number of cable Internet subscribers increased by 17.2 per cent to four million in August 2006. That's a slightly slower growth than in previous years.

Half of cable television subscribers also subscribe to Internet services. High-speed Internet subscriptions vary across the country.

The total number of cable television subscribers reached 7.8 million as of that date, an increase of 2.2 per cent in one year. This was the strongest annual increase since 1994.

Subscription revenues grew by almost 16 per cent to $5.9 billion, with two-thirds of the additional $800 million in revenue coming from non-traditional service, mainly Internet access and telephony.

Statistics Canada says Internet access yielded $1.7 billion in revenue last year, a 19.9 per cent increase from 2005. Telephony generated $267.8 million in revenues, five times the 2005 level. Revenue for television services increased by 7.5 per cent to $3.9 billion.

Meanwhile, the Statistics Canada report also said the number of wireless subscribers, mainly for satellite television service, grew by 5.5 per cent to 2.6 million, as revenues increased by 17.5 per cent to $1.7 billion.

© The Canadian Press, 2007