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Signs Appear That BCE May Be Readying Internet TV Launch
January 21, 2010
Ben Dummett and Andy Georgiades
DOW JONES NEWSWIRES

TORONTO (Dow Jones)--Bell Canada is quietly testing an Internet-based television service, which could mean it's getting ready to compete with cable-television operators Rogers Communications Inc. (RCI) and Videotron Ltd.

For years, Bell had promised to introduce this service, particularly in higher-density areas to complement its satellite-TV offering, which has proven more popular in suburban and rural areas. Proponents of IPTV argue it can offer more features than cable-TV services. But Bell's IPTV plans have been plagued by technical issues and concerns about potential profitability.

Bell Canada is the operating company of BCE Inc. (BCE).

About six months ago, Bell started advertising on a new Web page an IPTV trial in select areas of Toronto. Through the end of December, the packages range from C$49.50-C$82.50 a month, Bell's Web site says. These prices, representing a 50% discount to the packages' regular prices, are available for new customers who sign up by Feb. 28.

Excluding discounts, Bell's TV offering looks pricey compared to Rogers, but it includes more features. For instance, the regular price for Bell's lowest-tier "Essential" package is C$99 a month versus C$29.99 for Rogers' "Digital Basic" package. However Bell includes a personal video recorder and Internet access, for which Rogers charges separate fees. Bell's PVR is also more advanced, allowing users to control it through other consoles in the home or remotely.

Bell could launch the service in May, according to a post on a chat board of the popular Web site, Digitalhome.ca. The chat board involved people who were testing the new Bell service.

A Bell spokesman declined to comment on timing. He confirmed the trial, saying Bell remains committed to an IPTV launch.

In western Canada, Telus Corp. (TU) offers IPTV in competition with cable operator Shaw Communications Inc. (SJR). It also resells Bell's satellite-TV service under the Telus banner. Last week, Shaw reported a decline in first-quarter basic cable subscribers, with analysts attributing the decline in part to the Telus TV service.

At the end of September, Telus had 137,000 TV subscribers. It launched its IP service in 2005 and its satellite-TV service last year.

In November, BCE Chief Executive George Cope said he has been encouraged by Telus TV's results.

Still, any launch faces risks, analysts and fund managers say. Bell could cannibalize its satellite-TV service if customers switch, although this risk is somewhat limited if Bell focuses on areas where satellite TV isn't widely used.

The IP service is limited to areas where Bell has the required fiber network. At the end of September, that covered 2.8 million homes. Bell has said that total will climb to 5 million by the end of 2012. Bell faces additional costs to offer the service more widely, but it has also emphasized returning cash to shareholders.

In a recent note on Telus, Genuity said it costs about C$1,000 to add an IPTV customer on top of costs for network upgrades. BCE's Cope has said any IPTV launch wouldn't push Bell's capital-expenditure-to-revenue ratio beyond the level expected by investors, or 15%-16%.

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