IPTV RENEGADES CHALLENGE INCUMBENTS WITH CHEAP TELEVISION PACKAGES

George Burger
Cable and satellite companies, already dealing with competition for subscribers from companies such as Netflix Inc., have a new threat to worry about as a handful of technology-heavy startups prepare to launch rival television services at lower prices.



Internet protocol television (IPTV) – which delivers television signals into homes through the Internet over existing network infrastructure – has created an opportunity for a new type of company to get in on the country’s $17-billion television distribution industry that is dominated by a few large players such as BCE Inc. and Rogers Communications Inc.

While several small companies have for years considered offering television subscription packages, they have been frustrated by bandwidth caps that make their services too expensive for the average viewer and have had difficulty securing access to the channels that viewers demand be part of any television package.

That’s about to change Toronto-based VMedia Inc. has developed technology that compresses signals, reducing the required bandwidth and making its service a viable alternative to traditional cable and satellite packages. It will begin selling subscriptions in the Greater Toronto Area on Wednesday, after two years of planning. Zazeen Inc., another Toronto-based provider, recently began offering its service on a test basis after years of development.

The Canadian Radio-television and Telecommunications Commission has granted about 20 IPTV licences to small companies such as VMedia, it said, but most have small, regional ambitions and only a few are likely to make it to market owing to the barriers they face in securing access to channels and developing the technology needed it to make it into living rooms.

“We learned the hard way how difficult it would be to license content when you are a no-name company,” VMedia chief executive officer Alexei Tchernobrivets said.

For the incumbents, the startups represent a new front in the cord-cutting battle that has seen customers move to cheaper online alternatives such as Netflix and iTunes. But the new companies face a host of challenges, including the huge marketing budgets of established players and a lack of trust for new entrants, that could be difficult to overcome.

The companies – mostly centred in Montreal and Toronto – have been working out deals with content providers such as Bell Media and Rogers Media for the past two years, and building the set-top boxes customers will need to subscribe to their services. A few are ready to challenge the incumbents’ hold on 11 million households, who pay an average of $50 a month for their subscriptions. (Federal rules require broadcast companies like Bell and Rogers to sell access to their channels, even to rival TV distributors.)