Canada's Rogers Gears Up for VoIP in '05

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Canadian cable operator Rogers Communications Inc. said it will enter the voice-over-Internet protocol telephony business, targeting a mid-2005 launch to 1.8 million households, with the balance of its systems scheduled for 2006.

The MSO said it will leverage its existing DOCSIS broadband cable network and build its VoIP plant to Cable Television Laboratories Inc.'s PacketCable specifications.

Rogers president and CEO Ted Rogers told financial analysts that "a significant equipment cost decline," among other reasons, led the operator to make its plans public.

Rogers offers its Canadian subscribers similar voice, video and data services as U.S. operators, but with several key differences. Rogers operates a wireless phone business as well as a chain of video stores.

Although the company declined to discuss retail pricing, Rogers said, "we have no intention of deeply discounting on price."

"We'll create value with this product," he said. "The business case is solid without churn reduction. We'll be EBITDA [earnings before interest, taxes, depreciation and amortization]-positive in year three of operation."

The company estimated its fixed capital costs to deploy VoIP would amount to $200 million, with $140 million to $170 million of that occurring in 2004. Variable costs are expected to run between $300 to $400 per subscriber.

"Our ambition is to offer all the communications products," Rogers said. "We think technology is moving towards a hybrid model, but that technology is not here today. But we're comfortable it will be here in the future. Our plans are based on the standard cable model of telephony."

But Rogers and other company executives said the IP network Rogers is building will be able to handle future multimedia services. Executives also said they would pursue links between Rogers cellular network and its broadband network, allow users to integrate cell phone usage on Rogers' broadband plant.

The initial $200 million will be spent on improved network redundancy, enhanced backup powering and enhanced network management systems. "We want to improve the overall performance and reliability of our network so it can support premium telephone service," said Rogers Cable Inc. senior vice president of network engineering and operations Dermot O'Carroll.

Both lab testing and live trials with subscribers are slated for later this year, he said.

The multimedia terminal adapter will have its own power supply, he said, as Rogers will deploy telephony with both network and consumer premise equipment power for redundancy. He estimated the cost of the MTA would be $150 in Canadian dollars. Rogers executives declined to discuss what vendors it will choose for the rollout.

Company executives said Rogers has begun talking to third party telephone companies on interconnection services.

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