On Jan. 20, Rogers Cable Inc. CEO John H. Tory addressed an audience in London, Ontario, and made a rather startling comparison.
Referring to the blockbuster proposed merger of America Online Inc. and Time Warner Inc., Tory said, "If the revolution is one that brings Internet, cable and content together under one roof, under one banner, then the smoke has long since cleared in Canada. And Rogers has a considerable head start on going where AOL and Time Warner are headed."
Two months later, Rogers Cable and its parent, Rogers Communications Inc., boldly embarked on a campaign of dividing and conquering the Canadian cable market. Perhaps not coincidentally, Tory's speech served as a harbinger for a dramatic rapid series of events:
- In early February, Ontario-based Rogers Communications announced that it was merging with Le Groupe Vidéotron Ltée, Quebec's largest cable operator and one of the few cable companies in the world that can match the passionate drive for technological innovation that Rogers Cable embraces.
- On March 23, Rogers Cable announced a dramatic system swap with Calgary-based Shaw Communications Inc., trading its Vancouver systems for Shaw's Ontario and New Brunswick systems. The swap left Rogers with an entirely eastern Canada presence.
- Also part of the deal with Shaw was the merger of @Home Canada and Excite Canada (a 50-50 partnership between Excite@Home Corp. and Rogers Media Inc.) into a national content portal.
- The combined entity will be infused with a $50 million investment and be 51 percent-owned by Rogers, 22.5 percent by Shaw and 22.5 percent by Excite@Home.
- The day after the Shaw announcement, Quebec institutional investor Caisse de dépôt et placement du Québec and publisher/printer Quebecor Inc. reportedly made a stunning takeover bid for Vidéotron, throwing a roadblock into Rogers' plans for a huge, nearly contiguous cable system ranging from St. John, New Brunswick, west to London.
Successful or not, Rogers' aggressive wheeling and dealing is aimed at creating a tightly knit cluster of cable systems eventually capable of offering a suite of advanced digital services, including digital TV, Internet access and IP (Internet protocol) telephony.
Thus, Rogers will be staring down Canadian telecommunications giant Bell Canada Enterprises, which the company sees as its major competitor in the race to roll out advanced services in eastern Canada.
Rogers brings many assets in the form of its subsidiaries to the telecommunications battlefield brewing north of the border.
Rogers AT & T Wireless (formerly Rogers Cantel) offers cellular, digital personal-communications services and paging services. And Rogers' media properties include Maclean's magazine and a strong radio- and TV-broadcasting division with stations in Toronto and Kitchener, Ontario; Calgary, Alberta; and Victoria, British Columbia, as well as home- shopping channel TheShopping-Channel (tSc TV).
Not to be forgotten are Rogers' more than 200 video stores, giving the company a strong retail presence.
At the heart of Rogers' assets is its advanced network, which the company proudly proclaims to be the largest cable-network cluster in North America. Rogers also lays claim to the largest number of @Home Internet subscribers of any MSO in North America-just over 200,000.
Rogers' tightly clustered systems have allowed it to quickly roll out services to all of its subscribers at once, avoiding piecemeal deployments.
According to Dermot O'Carroll, senior vice president of engineering for Rogers Cable, the MSO's Ontario systems (before the Shaw swap) range east to west from Ottawa to Toronto to London; they pass 1.7 million homes; and they are interconnected with a fiber backbone system served by a single headend.
"When we launch a new specialty service on digital, it is instantly available to all of our customer base," O'Carroll said. This will be the case when it rolls out Microsoft Corp.'s WebTV Networks service by midyear.
"In effect," O'Carroll said, Rogers' Ontario cable network is one large single system from a network perspective.
Rogers' upgrade strategy was largely driven by the desire to be first-to-market with high-speed Internet access. "We saw the value of two-way [plant] back in 1995 and 1996 and decided to get two-way-capable as soon as possible," O'Carroll said. With that in mind, the company embarked on a rebuild, first engineering a 600-megahertz, two-way plant designed for Internet service. That upgrade is now 95 percent complete.
This early upgrade has given Rogers "the biggest Internet-access footprint in North America" of any MSO, according to O'Carroll.
The second stage of the upgrade, he said, will be to architect a 750- to 860-MHz network with average 600- to 700-home node sizes. He expects the majority of the Toronto area to be completed by the end of this year.
This effort is driven by traffic and performance requirements for Rogers' next-generation of advanced services, including telephony, interactive TV, video-on- demand and expanded digital-TV bandwidth.
"Because of our network infrastructure," O'Carroll said, "we don't do little market deployments. It's all or nothing. The day [a service] is introduced, it's available to all."
With digital-TV subscribers passing the 65,000 mark in February, O'Carroll has his sights set on VOD, with trials set for late in the third quarter or early in the fourth quarter of this year.
Rogers' aggressive embrace of advanced digital services attracted a $400 million investment from Microsoft last year. Explaining Microsoft's motives in the investment, director of TV-platform and WebTV marketing Alan Yates said, "We looked around the industry to find companies that had the internal commitment to lead the rest of the industry to support enhanced services."
Despite what Yates called "widespread skepticism" about a large deployment of enhanced-TV services, "Rogers was clearly among the leaders" in supporting those services. Microsoft hopes Rogers will create a showcase for its "Microsoft TV" client/server platform.
The deal with Microsoft includes an agreement to incorporate other Microsoft-based services-a Rogers branded e-mail product powered by Microsoft's Hotmail and other services based on MSN (The Microsoft Network) Search and MSNBC, among others-in conjunction with other Canadian services.
Rogers' close relationship with Microsoft will first manifest itself in the deployment of WebTV this year on Scientific-Atlanta Inc.'s "Explorer 2000" set-top, O'Carroll said.
Ultimately, the plan is to deploy an advanced digital set-top box (the S-A "6000") with a Data Over Cable Service Interface Specification modem inside, running Microsoft TV applications.
"We've got Microsoft and Scientific-Atlanta and ourselves in the same room making sure the hardware and software all come together and the memory and processing footprints of the hardware matches the requirements of the software," O'Carroll said.
But O'Carroll and Rogers have an interactive-TV backup plan. In January, Rogers agreed to license Liberate Technologies' interactive-TV platform. Rogers is an investor in Liberate.
O'Carroll explained the investment by noting, "If anything should go wrong with our implementation with Microsoft, we want to have an alternative available to us."
Rounding out its quickly moving advanced-TV-services schedule is a planned trial of VOD later this year, which will most likely be rolled out to large condominium developments and multiple-dwelling units.
MDUs will also be targeted for a circuit-switched telephony service offered through a partner-most likely AT & T Canada, O'Carroll said. He added that Rogers runs fiber directly to a large number of MDUs in Ontario.
This foray into telephony will be a precursor to a larger technical trial, scheduled for later this year, of voice-over-IP (VoIP), with a large deployment slated for late 2001.
O'Carroll pointed out that Rogers expects to learn about VoIP from its potential new partner, Vidéotron, which is engaged in the industry's most ambitious VoIP trial. Vidéotron-with 1.5 million subscribers in Quebec-is no slouch when it comes to technological innovation, as its VoIP trial demonstrates.
Vidéotron did not provide details of its IP trial. But a source familiar with the trial said it has entered the second phase. It ramped up its test group from 200 people in Montreal to 2,000 in February, and it is debugging the operational-support system and testing call-center support of the service. A June date has been set for a commercial launch, the source added.
While that date is well beyond the initial targets for a commercial launch, a Goldman, Sachs & Co. analyst said, "The benchmark we go by ... is that any technological or innovative development is never completed on time."
But if Vidéotron is late to market with IP telephony, it was well in advance of the industry with interactive-TV deployments. More than 11 years ago, Vidéotron launched an analog interactive-TV service called Videoway in Quebec.
Based on that legacy, PowerTV Inc. CEO Steve Necessary-who, while at Antec Corp. in the early 1990s, was involved with building boxes for Videoway-said Montreal is home to the "greatest concentration of interactive-TV users in the world."
Vidéotron's digital interactive service, scheduled to roll out next month, will utilize PowerTV's complete software stack-including its operating system, Web browser and news-on-demand, e-mail and chat software-on S-A's Explorer 2000 box.
Director of product development Guy Charbonneau is well aware of his highly critical audience. "Our customers are looking for interactive services, and they were disappointed to find that they were not there" when digital TV was introduced in Montreal last March, he said. The digital-TV service has attracted 40,000 subscribers provincewide.
Consequently, Charbonneau is being very careful about how he presents the new generation of interactive TV to his highly discerning customers. "We're working on providing applications and content that will be closely related to TV programming," he said. "People will be able to use a [Web] browser application ... but it will be closely related to what's on TV."
Charbonneau is trying to strike a balance between offering more information about TV programming through hyperlinks and adding features like e-mail capability appearing in a window in the corner of the screen, without detracting from the overall viewing experience by overwhelming the viewer with interactive elements.
Content categories for the new service will include weather information, stock information, movie listings, games and an interactive program guide for navigation.
Like his counterparts with Rogers, Charbonneau feels competing pressure from Bell Canada, which, among its stable of telecommunications companies, includes broadcaster CTV Inc. and Bell ExpressVu, the largest direct-to-home satellite-TV company in Canada. "If we want to compete against these people, we need to be quicker than they are," he added.
Clearly, Rogers is quickening the pace of its strategy to do battle with Bell Canada. The Rogers/Vidéotron marriage, if approved, would create a company serving more than one-half of the Canadian market, Janco Partners research analyst Roger Metz said.
Under the wing of a parent rich in content and wireless-telecommunications assets, a combined Rogers/Vidéotron boasts some of the industry's most advanced technology.
Armed with this technology, Tory's tacit comparison of Rogers to AOL Time Warner Inc. doesn't seem so far-fetched.