Cogeco partners with TiVo, ditches IPTV plans

Cogeco Cable Inc. has abandoned a multi-year project to establish an Internet protocol-based TV platform in Canada and will instead launch a service in partnership with TiVo Inc. that its CEO says gives it "all of what we want and more." The decision to cancel plans for building out an IPTV system for Canada resulted in its third-quarter profit being cut almost in half, the company announced in a press release issued late Wednesday. The company said its earnings for the three months ended May 31 were $35.5 million, down from $48.1 million a year earlier. Its recent results included a $32.2-million impairment charge related to "property, plant and equipment, capitalized wages and borrowing costs" that were put toward its IPTV project. Cogeco CEO Louis Audet said during a conference call Thursday that the company will instead get "all of what we wanted and more" through a partnership with TiVo, which will largely mimic an arrangement Cogeco’s U.S. subsidiary Atlantic Broadband has had in place since last year. He said TiVo service will be rolled out to Cogeco's cable customers in Canada within the first half of its next fiscal year, and it will provide users with the ability to watch live, recorded, on-demand or over-the-top (OTT) content on a variety of devices, including televisions, tablets and smartphones. A search engine will help viewers find desired content from either live, recorded, on-demand or online sources, he added. Audet said Cogeco had been working with an unnamed "renowned supplier" on the IPTV project "for a few years, and have come to the conclusion that it was simply not going to work, and that it was not worth investing any further efforts in doing so." In a later phone interview Thursday with The Wire Report, Audet said work on the IPTV project started before Cogeco completed its purchase of Atlantic Broadband in November 2012. He said the U.S. unit, at the time, was also seeking a more versatile platform for content delivery, and turned to an "off the shelf" product offered by TiVo, which it started using last October. Atlantic Broadband, through its arrangement with TiVo, announced in April that it would start providing customers in the U.S. with direct access to service from Netflix Inc. Audet would not say whether the same would happen in Canada. "We haven't really announced the specifics for the TiVo service for Canada, nor have we announced the pricing and that kind of thing, so we will stay away from that until such time we are ready to launch, and then we'll announce what we've been able to negotiate with various suppliers," he said. During the conference call, Audet said much of the previous work building the IPTV system would still be used for the enhanced service that will be offered through the TiVo agreement. He added that Cogeco would likely revisit the issue of converting to an IPTV platform at some point. Audet said eventually "all of the data circulating on the cable system will be in IP form." Cogeco Cable said in its earnings release that revenue in its third quarter was $496.4 million, up 6.9 per cent from a year earlier. It was up 3.5 per cent at its Canadian cable operations, 12.2 per cent at its U.S. cable business and 15.3 per cent at its enterprise division. The company said it ended the quarter with 1.03 million TV-service subscriptions, down 9,620 over the quarter. Its high-speed Internet connections rose 7,811 during that time to 865,597, while its phone connections were down 700 to 551,530. Even though its U.S. operations lost TV customers, as in Canada, Audet said during the conference call that the TiVo product in the U.S. has helped mitigate the loss. Phone companies such as BCE Inc. and Telus Corp. have been growing their base of IPTV customers even as subscriptions for other types of TV service decline. Another cable company, Roger Communications Inc., indicated in its intervention for the CRTC's review of the television industry that it intends to establish an IPTV platform within the next year or two. Dvai Ghose, telecom analyst with Canaccord Genuity, said in a phone interview that it's more complicated for cable companies to convert to IPTV than many people realize. He said there is an "enormous" amount of capacity required to operate IPTV and older cable systems in conjunction with each other, yet it must be done because it will take many years to replace all of the legacy equipment. "You get none of the efficiencies of IPTV until you close down your broadcast network, and that takes years and years and years because you've got to swap out every set-top box that's out there," Ghose said. When the phone companies brought forth IPTV, they were "virgins," Ghose said, with "nothing to overlay." He added that none of the cable companies in Canada have co-operated on their IPTV conversion plans to reduce their overall costs through economies of scale. Ghose also said there is some reluctance among cable executives to spend large amounts of money upgrading their TV systems given the general decline of people subscribing to TV services. — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Peter Henderson at phenderson@thewirereport.ca

Cogeco partners with TiVo, ditches IPTV plans

News | July 10, 2014

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Cogeco partners with TiVo, ditches IPTV plans

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