The Daily. Thursday, August 2, 2001

Cable and wireless program distribution

Wireless operators substantially expanded their share of subscriptions to audiovisual programming services in 2000, mainly at the expense of small- and medium-sized cable operators.

The market share of wireless operators' satellite and multipoint distribution systems grew from 6.5% in 1999 to 10.8% in 2000 (based on a fiscal year ending August 31). The number of subscribers to wireless services surged 74.6% to 967,800, but subscriptions to cable operators declined 0.5% to 7.9 million.

The competition from wireless operators had the biggest impact on small- and medium-sized cable operators, nearly 60% of whom lost subscribers. As a group, they incurred a net loss of 84,400 subscribers in 2000, and a total net loss of 202,000 during the period from 1998 to 2000.

The decline in 2000 in the number of subscribers to cable services occurred in all provinces except Quebec, where the situation remained essentially unchanged from 1999.

As a result of this gain in market share, operating revenues of wireless operators more than doubled (+128.2%) in 2000 to $390.5 million. Meanwhile, cable operators reported an 8.6% rise in total revenues to $3.6 billion.

Despite the strong growth in revenues and in customer base, the wireless segment of the industry failed to show a profit. This occurred mainly because of extremely high promotion and technical expenses - about $400 per subscriber in 2000 - incurred to attract and connect new customers. Cable operators, however, reported a strong profit margin (before interest and taxes) of 19.3% in 2000.

Cable operators face strong competition in their traditional market, but are doing well in new expanding markets, in particular high-speed Internet by cable and digital television. High-speed cable modem services attracted 422,300 new customers to the cable industry between September 1, 1999 and August 31, 2000, an average of just over 35,000 new customers a month. At the end of August 2000, there were 786,300 subscribers to this service, compared with 364,000 a year earlier.

This very rapid growth continued in the later part of 2000. The number of subscribers surpassed the 1-million mark in early 2001, according to the Household Internet Use Survey release in The Daily on July 26.

Nationally, 10.5% of households with access to high-speed Internet by cable were equipped with cable modem in 2000, up from 7.6% in 1999. Market penetration of cable modem was highest in the Prairie provinces and in British Columbia, and lowest in Atlantic Canada.

Also gaining momentum is the penetration of digital technology that allows, or will allow, cable and wireless broadcast distributors to offer a range of interactive services such as interactive program guides, television-based Web access and interactive television. As of August 31, 2000, cable operators had deployed 390,800 digital terminals, and wireless operators had deployed 967,800. In total, 15.2% of subscribers to programming services had adopted the digital technology.

Substantial investments were made to upgrade the existing cable infrastructure to offer cable modem and digital television services. The cable industry invested $3.4 billion over the 1998-to-2000 period, or close to $310 per home with access to cable service. More than 80% of this investment went into systems that are now offering both cable modem and digital cable services.

Available on CANSIM: (unadjusted data only) table 3530001 and matrices 1819 and 1822-1829.

More detailed information is available in the Broadcasting and telecommunications service bulletin, Vol. 31, no. 3 (56-001-XIE, $10/$32).

For more information, or to enquire about the concepts, methods or data quality of this release, contact Daniel April (613-951-3177; daniel.april@statcan.gc.ca), Science, Innovation and Electronic Information Division.

Selected market and performance indicators for cable, satellite and multipoint distribution systems, fiscal year ended August 31