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February 1, 1995. Four red trucks pull up outside one of False Creek's new residential high rises. Six men get out. Four of them proceed to the entranceway of the building at 289 Drake Street. Their objective: to gain access to the communications control centre for Concord Pacific's entire Expo lands development. The remaining two locate a service shaft, lift the cover and begin their descent. Stamped onto the steel manhole cover are the words 'BC Tel'. Stenciled white letters on the trucks spell out the corporate affiliation of the intruders: 'Rogers'. The war of convergence is underway.
As corporate battles go, this one is fairly recent. Only a decade ago, technology and regulation combined to keep telephone companies (telcos) and cable companies each in their separate corners. Telcos like BC Tel, Bell Canada, and the six U.S. regional 'baby Bells' created after the breakup of AT&T provided the wire and switching circuits for the transmission of sound: low-frequency, analog, ever-so-human speech. Cable companies like Rogers, Shaw and Cogeco on the other hand, maintained extensive networks of coaxial cable and microwave relays to pipe a somewhat higher frequency analog signal from station to living room, where a little device know as the idiot box turned it back into television.
Then along came the microchip, and the microprocessor. The digital revolution. Increasingly, everything - words, pictures, sounds - was being converted into long strings of 1s (ones) and 0s (zeros): digitized. Artists discovered a new way of recombining information into a new digital package called multimedia. Pundits predicted that the ability to reduce the entire world into 1s and Os would forever transform our view of the universe and of ourselves.
For BC Tel, the digital revolution revealed yet another way to make money. It turned out that a lot of people were willing to fork over hefty sums to have digital information - credit card numbers, database records, financial transactions - shifted from one place to another over the phone lines. Across North America telcos spent billions converting their lines and switches so they could handle digital traffic.
For Rogers, the digital age dawned with the realization that if cable was going to compete with 500-channel satellites - the so-called death stars - cable customers would have to be able to get a lot more networks than just the basic ABCs, NBCs and CBSs. Customers were looking for specialty channels and for offerings like home shopping and movies on demand. To deliver these last two, Rogers had to spend several hundred million to reconfigure its system so information could flow bi-directionally, from station to living room and back again. Consumers had to be able to send out a signal - "I want to watch The English Patient tonight" - and receive a signal back in the form of the movie. Rogers invested heavily, laying down notoriously expensive optical fibre, 700 kilometres in the Lower Mainland alone.
When their respective upgrades were in place, both Rogers and BC Tel would have extensive networks capable of the high-speed transmission of digital information. Each could then potentially supplant the other. Rogers could take over local phone service. BC Tel could move into providing cable. Either could move into new fields like home shopping, electronic banking and Internet service. That, in a nutshell is what is meant by convergence. And whenever two bodies are trying to occupy the same space, the potential for conflict is enormous.
In Vancouver, BC Tel struck first. Taking aim at the keystone of the Rogers empire - the monopoly on local cable service - BC Tel signed a deal in 1993 to provide cable service to Concord Pacific's shining new development on the shores of False Creek. A symbol of Vancouver's coming of age as an international city, Concord's bright new monoliths came wired to the core with optical fibre, giving them a built-in ability for the most sophisticated voice and data communications. All Concord needed to complete its wired world was someone to hook up TV service.
Together, BC Tel and Concord Pacific formed a company called Pacific Place Communications (PPC) whose sole purpose was to obtain TV signals via satellite and then pipe them in to each of the heavily wired luxury condos at a price well below that normally charged by Rogers.
Rogers' retaliation was swift. Through a numbered company, Rogers bought a condo in one of the Drake Street towers. A Rogers VP moved in and promptly filed suit against PPC, claiming he was being denied access to the Rogers Community Channel. Another Rogers employee went around the Concord buildings with a petition, trying to enlist residents in a drive to demand the return of Rogers service. No surprise, but few signed on.
Finally, in early February 1995, Rogers sent at least a dozen of its trucks into the Concord lands, apparently with the intent of gaining access to BC Tel's cable equipment. Tenants at 289 Drake reported seeing Rogers employees popping in and out of BC Tel manholes. A group of Rogers technicians even tried to bluff their way into PPC's control centre, claiming Concord owner Li-Ka shing had given them permission. That mission failed when an alert PPC employee called head office. It's impossible to say whether other members of Rogers' raiders accomplished their objectives, because the company has steadfastly refused to explain exactly what they thought they were doing. News of the raid, however, served to further darken the reputation of a company already bruised by the earlier consumer revolt over so-called negative option billing. Chastened Rogers executives apologized, and the company pulled back its troops and retreated into the arms of the CRTC.
In late February 1995 the federal communications regulator began hearings to review a Rogers complaint that PPC was violating CRTC policy. After all, said Rogers, Concord is part of the geographical area over which Rogers holds a monopoly. In addition, said Rogers, the fact that the American firm GTE is the majority owner of BC Tel meant that the telco was prohibited by CRTC regulations from having anything more than a 20 per cent stake in a Canadian cable operation.
These arguments were not without merit, but Rogers' appeal to the government regulator was more than a little ironic. For if digital technology was what made the wars of convergence possible, deregulation is what made it inevitable. Rogers was among the front ranks of companies demanding that the CRTC ease up on the regulations so that others with alternative transmission networks could have a share of Ma Bell's pie. In 1992, for example, Rogers successfully lobbied the CRTC for permission to set up its data communications division - Rogers Network Systems - which now competes with BC Tel in the market for the expensive leased telephone lines used by banks, universities and high-tech companies with heavy data demands.
Deregulation, however, cuts both ways. On September 20, 1995, the CRTC ruled that BC Tel's American ownership did render it ineligible to operate a cable service. However, the CRTC also ruled that if a Canadian company wanted to come in and set up on what was formerly Rogers tuff, that was fine. PPC restructured - BC Tel reduced its stake to 20 per cent - and in June 1996, the company, now called Pacific Place Cable, was awarded a Class 1 licence to operate a cable service in Vancouver. BC Tel lost majority control. Rogers lost its monopoly.
End of round one.
November 10, 1996. The tasteful living room of a house in West Point Grey. Reporters, politicians, techies and PR types stand around on the hardwood floor exchanging desultory small talk in between sips of complimentary fruit juice and coffee. Working the crowd is Glenn Wong, the head of Rogers' operations in British Columbia. A marketing wizard, Wong was brought in as a fixer after negative option billing put Rogers on a par with chartered banks in the pantheon of big, hated corporations.
The house itself - a 1920s cottage-style bungalow - belongs to Bruce and Patricia Gillespie. Bruce is a designer; Patricia, a management consultant. Were fractional children possible, the Gillespies would have 2.4. As it is they have only two. Both are blond, bright and computer-literate. Holding the product launch in the reflected glow of the Gillespies' radiant upper middle class niceness was, of course, Wong's idea. He calls for attention and then announces the reason for this little morning pow-wow: Rogers is taking on the telcos with a new and superfast Internet service, the Wave.
According to Wong, the invention of the Wave is comparable in importance to Microsoft's launch of Windows. "Before, you had text crawling across the screen. Now there are graphical oriented computers and multimedia. Before, it took half an hour to download a video clip. With the Wave, it takes 15 to 20 seconds."
As of now, Wong adds, the product is available to households in West Point Grey. By the beginning of 1997 the service will be available in 90 per cent of Vancouver. By the end of 1997 the Wave will be available to 80 per cent of homes in the Lower Mainland. The Wave is also being offered simultaneously in other parts of Canada through arrangements with other cable companies like Shaw, Cogico and Delta.
"Offering this kind of product," adds Wong, "is an example of how we want to compete."
With that Wong is finished and the show turns back to the Gillespies. Fourteen-year-old Sarah sits down at the keyboard of the family computer and begins downloading a video clip from the MTV web site. With regular dial-up Internet access this would be a good time to reach for that unread copy of War and Peace. This system doesn't even give you time to crack open the cover, let alone skim the first page.
In fact, the cable modem connecting this PC to the Internet is rated at 500 kbps, more than 17 times the speed of the standard 28.8 kbps telephone modem. The cable network doesn't quite perform to that speed, however, because the local cable loop is shared with other households in the area. In practice, Rogers has found that the effective throughput is about 200 kbps, a mere six times as fast as the maximum possible speed obtainable with a standard telephone modem. The Wave has the additional advantage that it's always connected. There's no need to dial in, and surfing the web doesn't tie up your phone lines.
The price of this haste: $55 a month, plus a one-time installation fee of $150. "That includes rental of the modem and ethernet card," says Wave marketing manager Glenn Beeswanger, with the practiced lilt of one who has said this many times, "plus unlimited access time, plus five e-mail addresses, plus five megabytes of space for a personal web page."
The $55 price tag may seem a bit steep compared with the $20 a month charged by most Internet service providers (ISPs), but according to Beeswanger, a fair bit of thought has been given to the pricing strategy. "When you factor in the cost of an added phone line, which you're going to need if you spend any time at all on the net, and the charges for extra time and for web page space, $55 a month looks pretty competitive."
Particularly when you consider the competition. BC Tel's response to Rogers Wave launch was a pair of full page ads in small community weeklies like the Courier and the North Shore News announcing the advent of something called ISDN@home. It's an acronym, of course. Acronyms grow like fungus in the fallout from the convergence wars. What it stands for is unimportant (oh okay, Integrated Services Digital Network), but in essence, ISDN@home is a package of two very fast phone lines, for use with either a computer modem, a fax or the regular telephone. Used separately, each line transmits data at 64 kbps, or more than twice the speed of a 28.8 modem. When combined the two ISDN@home lines deliver a speed of 128 kbps, about half the speed of the Wave.
ISDN@home costs the same $55/month that Rogers charges for the Wave, but it doesn't include the $500 that's required to purchase an ISDN modem, nor the additional cost for an Internet Service Provider - if you can find one that provides dial-up ISDN service. As of writing, not even Sympatico - BC Tel's Internet provider - is ISDN-capable, though it says it plans to introduce ISDN service sometime in February. Other ISPs are even more cautious. Lawrence Tolton, owner of Portal, says he will set up ISDN lines when and if there is sufficient demand. So far there is not.
The ISPs' caution about rushing in to provide ISDN service is understandable. ISDN service has been available for almost 10 years now. It was first developed for businesses that couldn't afford the more than $2,000 a month it costs to lease a 24-channel T1 line, but were still interested in transmitting data. It never took off. Even now BC Tel is working on replacing ISDN with a newer, faster four-letter acronym.
ADSL - yup, another acronym, this one standing for Asymmetric Digital Subscriber Line - is the telcos' real response to the Wave. When the bugs are finally worked out, it promises to provide Internet service in the hundreds of kbps, fast enough to give the Wave a good fight, when and if it becomes available.
At the moment, however, the Wave is the only product on the ground with a long-term future, and it appears to be gobbling up territory. During a test trial in the southern Ontario city of Newmarket, the Wave captured just over 50 per cent of the existing market of Internet users (about five per cent of all houses) in just a few short months. As more people come on to the net Rogers expects to increase its percentage of the market. By the year 2000, says marketing manager Glenn Beeswanger, Rogers plans to have two-thirds of home Internet users signed up on the Wave. In the absence of any more serious competition - and isn't that always the rub? - control of the access roads to the virtual highway will belong to Ted Rogers.
For Rogers the victory will be sweet. Internet service, however, is just one small battle in the overall war of convergence. Still un-fought is the conflict between cable and satellite TV, the struggle for supremacy between land lines and wireless telephony and the looming battle over local phone service. Expect those conflicts to heat up as the millennium draws to a close.
Shawn Blore is a Vancouver freelance writer.
COPYRIGHT 1997 Shawn Blore