Will the FiOS speed success impact Canadian cablecos?
Verizon launched new Quantum speeds
With the new speeds, Verizon users will enjoy speeds true broadband download at 300Mbps. At these rates, it will only take a couple of minutes to download an HD movie. This currently takes about 30 minutes on average for the fastest cable-base internet speeds. But the real advantage is not in the download speeds, but in the upload speeds. For anyone who wants to do HD videoconferencing, wants to host a seminar or meeting using Web-Ex or GoToMeeting, you will know that the slow responses are not on the Audio quality, but rather the slow response times of relaying your presentation to your audience.
Impact on Canadian Telecoms?
We believe that the move to GPON is a smart one offering speeds and bandwidth that cablecos will not be able to replicate. But the Canadian telecos have not invested in significant FTTP, but rather are more focused on FTTN. While FTTN should give both more consistency and faster upload speeds, cablecos can still compete (albeit through significant node splits, which are not cheap). Hopefully the success of FiOS and good results from the Bell trials in Quebec and Bell Aliant confirm that FTTP is the best short and long term investment strategy.
Impact for Canadian Cable companies?
In the short term, we can only see the negatives of FiOS success and increasing speeds for the Canadian telcos, but there might be some long term upside? If the USA based cablecos all rally together to make DOCSIS 4.0 a reality (or significant feature upgrades to DOCSIS 3.0) or all invest in a fibre based solution that can compete with the telcos, this could have some upside for the Canadian telcos who could benefit from the USA cable companies collective investments in next generation broadband and TV. But it is all negative in the short term: with TELUS more aggressive on their footprint and happy to meet Shaw on price, we expect a significant swing towards TELUS. Bell has been slower to rollout, but we are excited about what could be if their FTTP efforts in Quebec City offer a good return. Rogers have been losing TV customers and Bell has not even turned up the heat yet. Cogeco is losing to TELUS in Quebec and only Videotron (and probably Eastlink) are holding their own.
Even the modest improvements in user interface, combined with the advantages of a standards based solution versus the cable industry’s proprietary approach and decades-old UI have given IPTV the upper hand over CableTV. Losing the speed war will widen the gap. We expect high end customers who are reasonably close to a telco CO to flock to IPTV / FTTN ISP solutions while Canadian Cable companies will continue to lose customers to OTT and free-to-air antae providers on the lower end. The squeeze is on for cable companies, but maybe the increased pressure in the USA will drive some innovation?
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