Canadian Firms Wire Britain for Cable TV
Few British houses have cable TV, and even where they can get it only 20 percent are on the system. Canadian and US cable operators hope the British will follow North American trends.
CANADIAN cable operators are busy wiring the streets of Britain. Five Canadian companies have the right to provide cable television service to more than 2.5 million British households. The franchises to supply cable were granted in 1989 by the Cable Authority.
Late this year came an unexpected bonus: The firms supplying cable could also sell telephone services. Suddenly, the cable licenses became more valuable.
``The combination of entertainment and telephone service provides a unique opportunity,'' says Noel Bamborough, vice president of Cablecasting Ltd. of Toronto. The firm has a franchise to provide service to a quarter of a million households in Scotland. ``And we're dealing in a country where cable is virtually nonexistent.''
There are three big Canadian firms here: Videotron Ltd. of Montreal, and Maclean Hunter Ltd. and Cablecasting, both of Toronto.
Wiring Britain for cable was supported by the Thatcher government to broaden the choice of channels available to British viewers and end the so-called ``duopoly'' of British broadcasting. Britain's Conservatives see television - both public and private - as being dominated by the left.
There are four channels on British television, BBC1, BBC2, ITV, and its sister channel, Channel Four. The launch of satellite television - now controlled by Rupert Murdoch and his Sky Television - has added four more channels. But less than a million households in Britain have satellite dishes.
Cable brings as many as 30 channels to British viewers, including the four Sky satellite channels. Cable television's cost to consumers is about $32 a month, and can go higher with extra services such as movie channels. This is more than twice as expensive as basic cable in Canada. And the average Briton has half the disposable income of Canadians.
Still, both the operators and independent analysts expect the ventures will work.
``Canadian cable operators can see the potential that other people in Britain can't,'' says Douglas Kirk, communications and media analyst with Burns Fry Ltd. in Toronto. He says the British viewer will be tempted by multi-channel TV. ``There is an opportunity to expand viewers choice beyond the four channels in a way that is familiar to North Americans.''
Because Canada was the first country to extensively wire itself for cable television back in the 1950s, Canadian operators were a natural for this new market. Canada's cities are fully wired. More than 90 percent of Vancouver households have cable, about 85 percent in Toronto, and more than 60 percent in Montreal.
In Britain, few houses have cable and even where they can get it only 20 percent are on the system. So far, Canadian and American cable operators are betting the British will follow North American cable trends.
``This is where Canada was 25 or 30 years ago. It is a great business opportunity,'' says Pierre Herve, vice president of strategic planning for Videotron, speaking from the company's British offices near London. The company plans to spend $1 billion over the next 5 years setting up its British cable TV operation.
Videotron has the largest franchise of the three major Canadian cable operators in Britain. Bell Canada has a 30 percent interest in Videotron's British operation. It has a potential 1.2 million households in the suburbs of south London - where Margaret Thatcher is a potential customer at her new residence in Dulwich. The company has other franchises, including Southampton.
There are major differences from doing business in Canada; one is cost. In London, and the rest of Britain, cable wires have to go underground; they cannot be strung on telephone polls in backyards and alleys as they are in Canada. Cost is measured in the money needed to put a cable past one house; in Canada that is $250 to $300 per ``pass'', while in Britain it can be $700 or more.
``Even at $500 per pass, it means $2,500 per subscriber with a 20 percent penetration rate,'' said a Canadian cable TV operator who is not in Britain and asked to remain anonymous. He said the British recession has reduced the value of the British franchises. ``You could buy a cable franchise over there a lot cheaper today than you could a year ago.''
But some businessmen say being able to add telephone services to the cable line will add value to the cable TV franchises.
``That we could sell telephone services makes this dramatically different [from cable operations] in Canada and the United States,'' says Scott Colbran, senior vice president with Maclean Hunter, which has the franchise to service 960,000 British households. ``That is why the American Baby Bells are such large investors here.'' Pacific Telesis, NYNEX, Southwest Bell, and other US companies are the other big presence in Britain's cable market. Like Canadian companies, they could become partners with Britain's two telephone companies: British Telecom and Mercury.