Is it time to take the plunge?
When it comes to IP telephony, Canada's Big Four cable companies are like swimmers at a pool: Groupe Videotron and Cogeco Cable are both diving in headfirst, while Rogers Cablesystems and Shaw Commu-nications are shivering on the sidelines, waiting for the water to warm up.Groupe Videotron makes the biggest splash
With 1.6 million subscribers in the province of Quebec, Groupe Videotron is the biggest Canadian MSO that's committed to rolling out IP telephony. The rollout is nothing short of ambitious, according to Vice President of IP Telephony Francois Laflamme. First, Groupe Videotron will spend this summer testing voice-over-IP in an employee-based trial. Then, in the fall, the company "will be putting together an overall business readiness test that will enable us to get to service next year," he says. The rollout itself will start as an area-by-area deployment, but is expected to cover most of the company's territory within a year, Laflamme says. That works out to 2.3 million homes passed throughout Quebec.
To a casual observer, Groupe Videotron's push into IP telephony might seem pre-mature, if not downright foolhardy, considering there's a lack of standards for the service. But, to anyone who knows the company, it resembles just another well-considered risk, one that company executives say will likely pay off—just as past gambles on new technology and services have. That's because Groupe Videotron has a long history of successful innovation. For instance, its "Videoway" service, although seemingly primitive by today's standards, helped pioneer interactive TV many years before anyone had even heard of the Internet. As well, the company knows traditional circuit-switched telephony, having offered both cable and phone service through a subsidiary in the U.K.
Today, in fact, local telephony is the only aspect missing from Groupe Videotron's package of services to Canadian homes, says Laflamme. Videotron already offers both digital and analog cable, high-speed Internet access, and long distance telephone service.
Helping Groupe Videotron along in its great IP telephony adventure are Cisco Systems and Telcordia Technologies (formerly Bellcore). Together, the two are providing Groupe Videotron with an end-to-end, packet-based solution that will support voice, data and video across the MSO's hybrid fiber/coax (HFC) network.
Cisco is providing Groupe Videotron with an IP backbone, IP telephony gateways, multi-service cable transport, network design and overall program management. Equipment-wise, this includes the use of Cisco's broadband headend, the uBR7246 Universal Broadband Router, AS5300 voice-over-IP gateway servers, and a series of multi-gigabit, carrier-class IP solutions founded on the Cisco 12000 Gigabit Switch Router. The network itself will run on the DOCSIS ITU J.112 standard.
Meanwhile, Telcordia is delivering call agent software, operational support systems (OSS) and professional services to the MSO's IP telephony system.
Telcordia's call agent software will serve as a virtual local office switch, providing end-to-end signaling for the IP telephony gateways and intelligent call control features. It will also let Groupe Videotron connect with existing Public Switched Telephone Network (PSTN) service control points and SS7 (Signaling System 7) trunks.
And, perhaps most importantly from a customer service standpoint, Telcordia's call agent software will support 911, 411, local number portability, toll-free numbers and operator assistance. In other words, all the services people have learned to expect from a telephone company will be supported.
The OSS software will use many of the company's MediaVantage products to cover billing, service provision and activation services. And its professional services support will help Groupe Videotron through the sticky parts of managing IP telephony.
But can a cable operator truly set up, design and operate a carrier-class, reliable telephony network? Absolutely, says Laflamme. He has confidence in both Cisco and Telcordia, and believes they can deliver the kind of reliable telephone service consumers have come to expect.
However, this doesn't mean that Laflamme doesn't have concerns about rolling out IP telephony. In fact, he does, but not necessarily with the nuts-and-bolts of the network. Instead, Laflamme sees reorganization as Groupe Videotron's major challenge—making the changes that will convert a cable company into a telecom company.
This means putting integrated billing and customer support in place, so that customers get one bill which covers all their cable TV, telecom, and high-speed access usage. Fortunately, that's a process Groupe Videotron has been working on for the last two to three years, he says, "so that part is pretty much under control."
Finally, there's sales: convincing telco customers that they should make the jump to cable-based voice-over-IP is seen by some to be a major challenge. Referring back to Groupe Videotron's U.K. telecom experience, Laflamme predicts that acquiring 20 percent of the telco's customer base will be relatively easy, with things getting tougher after that. "But we do have good expectations about penetration," he says, without getting specific.Out of my way: Cogeco intends to be first
Cogeco Cable has about 800,000 subscribers located in Ontario and Quebec. And, if things go to plan, the company will be offering all of them both local and long distance telephone service by the end of 1999. In fact, Cogeco Cable's Ontario and Quebec subsidiaries have already applied to the Canadian Radio-television and Telecommunications Commission (CRTC) to be registered as a competitive local exchange carrier (CLEC). As for details of Cogeco Cable's plans, that's another story. Uncharacteristically, company officials refused to be interviewed. Instead, they referred to a November 18, 1998 news release, and an excerpt from President and CEO Louis Audet's 1998 shareholders' speech.
Based on those items, the IP telephony service will run over Cogeco Cable's 1,800-mile-long fiber optic network, which runs from Windsor, Ontario to Rimouski, Quebec. Along the route are Toronto and Montreal, giving Cogeco Cable access to the densest urban corridor in Canada.
Second, the company's IP telephony service will enter subscribers' homes through high-speed cable modems. Cogeco has been aggressive in rolling out DOCSIS 1.0 modems. In fact, 75 percent of its 16,000 Ontario Internet subscribers are already equipped with Samsung InfoRanger modems, and the company intends to start rolling out DOCSIS modems in Quebec as well.
Third, Cogeco Cable intends to offer IP telephony as a flat rate service, according to Audet, throughout the entire territory from Windsor to Rimouski. With Toronto and Montreal in the region, the lack of long distance charges is seen as a major competitive advantage and a reason for many consumers to switch carriers.
Finally, Audet told Cogeco Cable's shareholders that IP telephony "can be offered at a capital cost for the cable operator (that's) lower than $600 (U.S.$400) per telephone customer. This is about half of the $1,200 capital cost (U.S.$800) associated with traditional technologies."
One thing is clear: Cogeco Cable intends to start rolling out IP telephony by the end of 1999.Rogers: IP telephony not ready for prime time yet
At 2.3 million subscribers, Rogers Cablesystems is undisputedly Canada's largest MSO. It's also a technology pioneer, with the invention of fiber ring architecture among its achievements. But a large customer base, combined with a commitment to R&D, doesn't mean that Rogers is about to leap into IP telephony. In fact, the opposite is true, says Alexander Brock, vice president of business development (telecom) for Rogers' parent company, Rogers Communications Inc. Although Rogers is actively involved in IP telephony research as a member of CableLabs' PacketCable committee, the MSO is taking a wait-and-see approach to the technology, says Brock. That's because "a little more work needs to be done in terms of creating IP telephony as a carrier-grade product," he says.
Brock isn't convinced that today's IP telephony products can serve a network as large as Rogers.' Second, he's worried about reliability. Telephony customers are accustomed to a high level of network reliability—and a wide range of calling features—and Brock's not convinced that current IP-based products can support a competitive product.
Rogers' bottom line is simple: rolling out IP telephony is going to be an expensive gamble, so it had better go right the first time. Hence, the MSO's decision to delay. "We're waiting for quality of service, and that's coming with DOCSIS 1.1," says Brock. "We want to make sure that we can deploy with quality of service, so we're taking the attitude of, 'let's get it right: let's plan it properly, let's make it scalable, and let's make it a service that is compelling'." Offering a compelling service, with all sorts of extras like videoconferencing and distance education, really matters to Rogers, "because it means that we don't have to be a 'me too' service," he adds. "I don't particularly want to get into that business," says Brock; namely, taking on the telcos on price alone, rather than beating them with enhanced features. All told, Brock doesn't expect Rogers Cablesystems to offer IP telephony until 2000 or 2001. Not coincidentally, that's the time he expects IP telephony products to be up-to-snuff in quality.
In the meantime, Brock says Rogers will sit tight. "Our policy is that we're not going to launch products on a mass market before we're sure that they're ready, particularly in terms of telephony, where people have expectations."Shaw rolling out digital cable
Right now, Shaw Communications is rolling out General Instrument digital set-top boxes to its 1.5 million subscribers in western Canada and Ontario. The deadline for deployment: the end of 1999. However, just because these boxes could theoretically be used for IP telephony doesn't mean they will be. At least not in the near future, says Shaw Communications President/CEO Jim Shaw Jr.
In fact, Shaw Communications is only in the planning phase when it comes to this technology. That's because the company is "still waiting to see the outcome of various tests of IP telephony," he says.
To date, Shaw is awaiting a "breakthrough" in the development of deployable equipment. As well, it's "taking a bit of a 'wait-and-see,' as we want the price of equipment to drop substantially," he adds.
The situation is akin "to the early days of cable modems. We're not concerned that not being the first one isn't the smartest move," says Shaw.Two different answers
When it comes to IP telephony, Canada's big-four MSOs are probably more divided than they've ever been. This lack of unity is partially a result of Canadian cable's culture—all are family-run businesses accustomed to running things their way. But it also speaks to the lack of consensus among these players as to cable TV's strategic direction. In general, they all agree that the future is based on IP. However, what divides them is timing.
Whether the market will tolerate both responses remains to be seen. One thing is clear: the relative merits of each approach will play out over the next few years, in front of the world's broadband industry.