Source : Globe & Mail

Péladeau accuses telecom of stacking deck in telephony

Quebecor Inc. chief executive officer Pierre Karl Péladeau yesterday accused BCE Inc. of pumping money into its Bell ExpressVu satellite television service with the sole intention of financially damaging its cable rivals so they won't be able to compete in local telephone service.

At a Canadian Radio-television and Telecommunications Commission hearing into Bell ExpressVu's licence renewal in Hull, Que., Mr. Péladeau said BCE is "willing to do anything to get market share from cable distributors," and to do so it is "taking the broadcasting system as a hostage."

After several years, Bell ExpressVu is still losing money, Mr. Péladeau told the commissioners, and that shows that the purpose of the operation is really to maintain the status quo in local telephone service, not to make a profit.

Cable firms, such as Quebecor's Vidéotron unit, are forced to spend huge amounts to compete with Bell ExpressVu, he said, preventing them from investing in telephone technology that could compete with BCE arm Bell Canada.

Bell Canada essentially has a monopoly in local telephony, Mr. Péladeau said, and "it is the nature of monopoly to deploy all means at its disposal to maintain its monopoly." Bell ExpressVu is "merely a pawn in [BCE]'s inertia game."

The CRTC panel expressed some misgivings about Mr. Péladeau's proposition, and one commissioner characterized it as a "black and white conspiracy theory." Others questioned his concerns over Bell ExpressVu's losses, when Shaw Communications Inc.'s Star Choice satellite system is in similar financial straits.

Some cable companies agree with Mr. Péladeau's view. Cogeco Cable Inc. CEO Louis Audet told the panel that the CRTC should make it easier for cable companies to get into telephone services, and shouldn't be doing anything to make Bell's life easier.

"Unshackle cable please," Mr. Audet said, "and remember the phone companies don't need your protection."

In his presentation, Mr. Péladeau also said Bell ExpressVu intentionally operates a system that makes it easy for users to steal satellite signals without paying, a strategy he called a "triumph of cynicism."

Financial losses from satellite signal theft are damaging broadcasters, and hurting Quebec culture in particular, he said.

Mr. Péladeau told the commissioners that they should force Bell ExpressVu to reveal information that will expose just how much satellite signal theft is actually occurring. That would simply involve comparing the number of satellite decoders sold since the company came to market with the number of current customers, he said.

Quebecor also wants BCE to separate Bell ExpressVu from its other operations, so there can be no cross-subsidization.

(BCE also controls Bell Globemedia, owner of The Globe and Mail and the CTV television network.) Earlier in the day, Bell ExpressVu president Tim McGee told the panel that while the firm has lost money in the first six years of its operation, it expects to generate EBITDA (earnings before interest, taxes, depreciation and amortization) by the end of next year.

Mr. McGee said the company needs about 1.7 million to 1.8 million customers, up from the current level of about 1.3 million, before it can generate positive free cash flow. It expects to hit that benchmark by the end of 2006.

He said a key new market for the company in the coming years will be people who live in apartments and condominiums in larger cities, a market now dominated by cable.

Mr. McGee said his firm is working hard at combatting signal theft, partly by requiring that customers provide photo identification or credit cards when they buy receiving equipment. "We are turning away pirates at the door," he said.

Several interveners wanted Bell ExpressVu to take more action on signal piracy. The Canadian Association of Broadcasters said the firm should report regularly to the commission on the number of receivers it has sold and the number of active and inactive accounts.

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