TORONTO – As part of a media tour in Toronto last week, SaskTel president and CEO Ron Styles sat down with Cartt.ca to discuss the telecom company’s most recent financial year and its upcoming projects. However, he declined to comment on this spring’s upcoming AWS-3 spectrum auction, of which SaskTel is one of the applicants planning to bid on licences in Saskatchewan.
“We’re prohibited by the federal government to discuss that, while the auction is getting ready to kick off,” Styles (pictured) explained. “I can’t really comment on AWS-3 at all, otherwise I’ll be getting a call.”
As reported by Cartt.ca earlier this month, Industry Canada has included a set aside provision for new entrants in the AWS-3 spectrum auction that will restrict SaskTel (an important Crown Corp in its home province, but quite small compared to Rogers, Telus and Bell) to vying against the Big Three for the non-set aside spectrum available in Saskatchewan. In addition, SaskTel is not eligible to participate in the other spectrum auction happening this spring, for 2500 MHz licences, because of a spectrum cap rule that disqualifies SaskTel due to the amount of 2500 MHz spectrum it already owns.
“We would have loved to have participated (in the 2500 MHz auction). We use two bands of 2500 MHz on our Fusion network, and we obviously could use more spectrum,” Styles said. “But the federal government has rules and those rules have been applied to us, and so we won’t be able to participate.”
The CEO was a little less diplomatic when discussing the federal government’s move last year to cap wholesale domestic roaming rates, as a temporary measure until the CRTC issues its own decision regarding roaming charges, expected in the next few months.
Styles said while he appreciates the federal government’s intention was to remove restrictions on the ability of new competitors to develop in Canada, he said there’s no use developing new competitors if you’re somehow disadvantaging the fourth carriers such as his that exist in different regions of the country.
“We’re not a proponent of more regulation when it comes to something like roaming,” he said, adding SaskTel should be exempt from the wholesale roaming rate caps, which have been set at retail rates, and should be allowed to continue to negotiate roaming agreements directly with the Big Three.
“The network we have in Saskatchewan is an advantage for us. It allows us to balance off some of the advantages the Big Three have. We don’t have the same buying power, for instance, when it comes to vendors and things like that,” Styles said. “So it’s a way for us to be able to give something to get something in negotiations and discussions. We’re concerned that’s being taken away, which will put us at a disadvantage going forward.”
“I’m not sure the original intent was to bonus the three of them, versus us.” – Ron Styles, CEO SaskTel
The fourth, regional carriers in other parts of Canada, such as Videotron in Quebec, MTS in Manitoba, TBayTel in northern Ontario, and Eastlink in the Maritimes, are also being adversely affected by the government’s wholesale roaming rate cap, he added.
Speaking for SaskTel, Styles said the changes to wholesale roaming rates have had “some pretty significant impacts” for his company from a financial perspective, “and those benefits are accruing back to the three majors. I’m not sure the original intent was to bonus the three of them, versus us,” Styles said.
In terms of the company’s overall financial picture, it isn’t scheduled to release its 2014 year-end results until mid-April. However, Styles was able to say the company will be close to the targets it set for fiscal 2014, and its net income will actually be a little higher than the $59.2 million it anticipated.
However, he added that landline subscriber numbers dropped off more than expected in 2014, with the company forecasting another 27,000 landline customers will be lost in 2015. Currently, SaskTel has about 270,000 consumer and 166,000 business wireline customers.
On the wireless side, SaskTel has about 618,000 subscribers and Styles said SaskTel did not see the type of growth in wireless subscriptions that it had originally targeted for 2014. However, its average revenue per user numbers for wireless were a little higher than originally expected.
Where the company did see significant growth was in data usage, both on the wireless and wireline side of the business, with 61% growth in data on its wireless network, while broadband data usage continues to grow by about 50%.
“We talk about cord-cutting all the time, and yes, people are dropping their telephone lines, but they’re keeping their connections, in terms of broadband, and they’re moving a lot of data still,” Styles said, adding “everything is going over the top”, whether it’s banking or shopping online or watching Netflix or YouTube videos.
Apart from video being a data hog, even day-to-day activities such as the increased use of social media is driving data growth on wireless, he added. Although SaskTel is not able to track if customers are using tablets more than smartphones these days to view video, the company is seeing a real uptake on the tablets it sells to its mobile tablet plan customers.
While its wireline business has been impacted by cord-cutters and so-called “cord-nevers” — millennials who have opted not to subscribe to a landline at all — SaskTel has not seen the same phenomenon happening on the television side of its business, at least not yet, Styles said.
SaskTel continues to see modest growth in its MaxTV subscriber numbers, with subscriptions increasing by roughly 2,700 to total about 104,000 at the end of 2014.
“For us right now, we’re still at a point where those over-the-top products are more like complements to our regular TV product.” – Styles
“For us right now, we’re still at a point where those over-the-top products are more like complements to our regular TV product. We don’t see them as replacements, or we haven’t seen that trend develop in Saskatchewan yet. Now, it may be coming,” he said.
SaskTel has developed its own over-the-top app to allow MaxTV customers to watch movies on demand and that plus the likes of shomi and CraveTV, will continue to make traditional TV providers competitive against pure-play OTT services.
In 2014, SaskTel extended its Fibre to the Premises (FTTP) network past an additional 26,000 customers, with 19,000 actually being connected up. In total, SaskTel has about 40,000 customers connected to its FTTP network, with a total of 100,000 customer premises passed. SaskTel has invested approximately $50 million each year in its FTTP network, and expects to have it rolled out across nine major cities in Saskatchewan by 2020, Styles said.
Also on the urban side of its business, SaskTel rolled out about 1,200 Wi-Fi hotspots in 2014, and is planning to add another 1,200-plus hotspots in 2015, Styles said. SaskTel wireless customers are automatically authenticated on the Wi-Fi network through their mobile phone and are not charged for data usage, Styles said. He added that these service differentiators will help SaskTel to compete against other Wi-Fi service providers operating in the province, such as Shaw, whose largest community it services in the province is Saskatoon.
In terms of its rural broadband strategy, SaskTel continues to extend its Fusion LTE TDD (Time-Division Duplex) fixed wireless Internet service to more customers. Styles said SaskTel hopes to introduce 10Mbps access on its Fusion network in 2015, which is a little bit behind schedule.
Currently, the CRTC has set a broadband target speed of 5Mbps (megabits per second) for downloads and 1Mbps for uploads. In contrast, the U.S. telecom regulator, the Federal Communications Commission, recently announced its broadband speed benchmark is now 25Mbps for downloads and 3Mbps for uploads. When asked if a 25Mbps broadband benchmark is reasonable for Canada and how many years from now it might be possible to deliver, Styles said he thinks the FCC is “being very wise, in terms of looking to the long term and what people are going to need.”
He added: “I absolutely agree. I think 5Mbps might be the norm today, but in the very near future, people are going to need 10Mbps probably. And out I don’t know how many years, they’re probably going to need 15Mbps, 20Mbps, 25Mbps, as an average, as a minimum, maybe.”
Increasing bandwidth for customers is one of the main reasons SaskTel has moved to fibre in major urban centres and is also extending DSL service out to more rural communities (54 more communities in 2014), Styles said.
“We’re trying to make sure we’re thinking long term to have the ability and the technologies to be able to get bandwidth speeds up and to give people what they need.”
