TORONTO – It’s all about broadband, but not everyone is on the same technology page.
While George Cope, BCE president and CEO, believes fibre to the home (FTTH) is now “table stakes,” MTS chief executive Jay Forbes argues the cost structure for FTTH isn’t quite there yet and therefore, the company is taking a wait-and-see approach to deploying fibre more deeply within its provincial network.
“In its most simplistic form, we’re really building the copper network of the next 100 years with fibre to every premise and we see that as the only way to go,” Cope said during a presentation at BMO Capital Market’s 16th Annual Telecommunications and Media investors conference on Tuesday.
“In terms of investment, it’s interesting we were fortunate enough with the Bell Aliant early investment (and) we can see the numbers. The churn is better versus fibre to the node, the ARPUs (average revenue per user) are better, the cost of servicing is better and it’s clearly a market leadership position you get as a result of that,” he added.
Fibre broadband is not only critical from a speed perspective – being able to jump from 1 Gbps to 10 Gbps – but it also represents a hedge against potentially stabilize video revenue in the future.
“Fibre will give us the ability to go 10 Gbps – the concept of speed will be gone as an issue for customers in the telco world,” said Cope. “Over time, probably you’ll see the broadband pipe, that ARPU, will grow and the video revenue on a per customer basis will probably be pretty stable because with all the different OTT services, so you’re going to see the broadband value go up and the video service become more competitive in the marketplace.”
Bell already has a considerable FTTH footprint. By the end of this year, it expects to have upwards of 2.3 million homes connected. There is also the Gigabit service the company has introduced that will drive demand. The company believes that within about 10 years, it will have 10 million of the 11 million homes it serves on FTTH.
Earlier this year, Bell announced a Toronto Gigabit service rollout and Cope credited the partnership it struck with Toronto Hydro to do it more cost effectively.
“If you look at our plant we would have been 50% buried, 50% aerial. But by, in essence, sharing our different poles with Toronto Hydro it took our aerial build to 70% versus 50% and … the difference between an aerial fibre build versus having to dig up one out of two roadways, the backyards, etc is quite different in terms of the cost structure. So that was a significant part of why we moved forward,” he explained.
But while BCE is going to full steam ahead with its FTTH deployment, MTS is taking a different route. Rather than a build-it-and-they-will-come approach, the Manitoba telco is going to roll fibre in greenfield neighbourhoods while sticking with its VDSL offering where it’s available.
Forbes acknowledged that the cost curve for fibre is coming down, but said the installation costs remain too high for MTS to do a broad FTTH deployment. So fibre to the premise and its cost model is still an unanswered question when it comes to doing network wide deployment.
“We see that being more than adequate in terms of serving existing needs or the foreseeable needs in the marketplace.” – Jay Forbes, MTS
“The other piece for us is we’re tapped into the marketplace. What does the consumer need? And what is the competitive offering in the marketplace? From a consumer need, about 70% of our footprint is addressed either through fibre to the home or fibre to the node and with VDSL delivering 50 megs per second of broadband speed, we see that being more than adequate in terms of serving existing needs or the foreseeable needs in the marketplace,” he said.
Where MTS is differentiating itself in the market is its Total Internet offering, a product that allows a subscriber to access the Internet anytime and anyplace over wireline or wireless. MTS is uniquely positioned to capitalize on this offering since it’s the only wireline provider with traditional cellular wireless and vice versa. And while the service has only been in the market for a few short months, subscriber additions are in line with expectations which demonstrates that the company has “tapped into something of importance to our customers,” said Forbes.
“And thus far we’re quite encouraged in terms of the reception that we’ve been able to get for this. And of course, this is a bundled offering and we would be able to add video whether wireline or home security features to it as well, so the retention value that comes with this is really quite impressive as well,” he explained.
Total Internet also represents a solid tool to increase overall revenue per household and to manage churn. So customers that may have only been a wireline subscriber can now add wireless and benefit from anywhere, anytime access to the Internet as part of a bundle.
“We’re also seeing some interesting upsell opportunities so as people start to consider this and look at the price point of this and the value inherent in this Total Internet offering, we’re seeing an opportunity to actually step up the speed and we’re seeing that as a nice add on in terms of revenue growth as well,” added Forbes.
The presentations from Bell and MTS show that while broadband is a critical piece of the wireline business, there isn’t a single strategy.
