2013-01-04

Zazeen - shaking up the Canadian TV landscape

Zazeen finally made their IPTV product available for public signup. Though it's still just in its beta-testing stage and likely will be for several more months, it marks the beginning of a new kind of TV distribution system for Canadians. Zazeen's offering is delivered via your home Internet connection rather than a satellite or closed coax/fibre network feed.

Updated Jan 17 to reflect Zazeen channel updates

Other Internet service providers have deployed IPTV products in Canada before, and some of the large media companies have offered TV service based on IPTV or IPTV-like technology. The difference this time is that Zazeen will be offering the service over a last-mile which they do not control and will be using pure "over the top" technology similar to that used by Netflix.

Small ISPs like ColbaNet offer IPTV service, but they only offer service in a limited geographic area and they usually have access to the last mile wiring, either because they own it or because they've installed their gear in the local telephone/cable company's facilities. Zazeen will be serving most of the larger metro areas of Ontario and Quebec, and does not own or control the last mile wiring in any of those areas as far as I know. Some of the traditional telephone companies use IPTV technology to deliver digital TV over their copper & fibre infrastructure, but their IPTV uses a separate logical network that happens to run over the same wiring as phone and Internet; the television feed into the household is not arriving at the subscriber's house as regular Internet traffic, it gets split off by the router/modem device at the point where the wiring enters the subscriber's house.

Zazeen therefore is something of a pioneer, bravely investing a significant amount of money while being highly dependent on wholesale Internet access from Rogers, Bell, and Videotron. I should mention that a CRTC-imposed condition of Zazeen's TV distribution license is that the service be provided over a "closed network" rather than being available to anyone with an Internet connection in the service areas. For now, the CRTC and Zazeen's regulatory lawyers take that to mean that you must be an Internet customer of Acanac or Distributel - the parent companies of Zazeen. This restriction is largely historical and bureaucratic rather than technical - many of the regulations governing "Broadcast Distribution Undertakings" or BDUs go back to the 1970s and 80s when cable companies started springing up all over the country. For now, Zazeen has to play by the rules created several decades ago for cable companies. Hopefully someday the CRTC will allow them to offer service to any customer in Canada, much like the satellite companies or unregulated services such as Netflix.

Channels and Pricing

During the beta period Zazeen only has one subscription tier priced at $40. That may seem a little expensive compared to the entry-level packages from most of the cable and satellite companies, but it includes a lot of channels that the other guys don't give you until you move to a more expensive tier.

The folks at Zazeen have said they'd like to be able to offer an entry level package in the $20-25/month price range along with higher priced tiers and pick-and-pay channels, but for now it doesn't make economic sense. Part of the problem they're facing is that they have to pay Rogers / Bell / Videotron for the Internet traffic used by their customers, and IPTV will cause a lot of traffic to flow from Zazeen's TV servers to their subscriber, leading to increased usage charges to Zazeen from the last-mile Internet provider.

They also have to live with the bundling or subscription ratio commitments the channel owners negotiate with them, and with the big players owning virtually all of the channels approved for distribution in Canada, the terms are not always favourable to an independent BDU and in turn the consumer.

Zazeen's offering will no doubt change after or even during the beta as they get a better idea of the cost of providing the service and the demand for each channel; check their website for the current list. Here's what you get right now in Ontario:
  • Canadian network affiliate channels, almost all of them in HD, with East and West feeds where available for timeshifting: CBC, CITY, CHCH, CTV, CTV-2, E!, Global, OMNI.1, OMNI.2, TVO
  • US networks in HD, East and West feeds: ABC, CBS, FOX, NBC, PBS
  • APTN, CPAC, The Weather Network, and a few others that are on the CRTC's list of channels every BDU must place in the basic subscription package.
  • News networks from CBC, CTV, and Sun.
  • Channels that are often left out of the basic tier: Animal Planet, Bravo, Comedy, Discovery, MTV, Space, Teletoon, YTV.
  • Sports channels: RDS, TSN, TSN2.
Popular channels that are currently absent from the list are:
  • Sports channels such as Rogers Sportsnet, NFL Network, NHL Network, Speed, The Score, The Golf Channel
  • CNN and Headline News
  • A&E, DIY, Food, HGTV, History, National Geographic, OWN, Slice, TLC
Over time as the service gains subscribers, the channels carried by Zazeen will catch up to the offerings of the satellite and cable companies, but don't be fooled by marketing material from the incumbents that says something like "157 Channels from $37.95/month". As usual, the devil is in the details. Their channel total includes HD and SD versions of the same channel, so you can almost cut the advertised number in half since most channels are available in HD these days. Zazeen is doing the right thing in my opinion and only offering the HD version of any channel unless it's only available to them in SD. The incumbents also inflate their channel count by including radio stations and the Galaxie music channels, which adds another 50-60 "channels" to the total. East and west coast versions of the same network are counted separately too, which is fair since they don't offer the same thing at the same time, but the programming they carry is identical aside from local news so it's not like you gain much extra on top of the timeshifting capabilities.

Price Comparison

If you compare Zazeen's initial offering against Bell Fibe, Bell Satellite, Rogers, and Shaw Direct, Zazeen doesn't look too bad at $40/month. Let's take a look at the cheapest available package from each of the incumbents and see how they stack up. I believe it's only fair to look at the monthly price of each service without any bundling discounts, contract terms, and teaser rates that expire in a few months. The marketing folks will try to suck you in with bold letters stating "From $19.95/month", but of course those deals have more strings attached than a marionette festival. It can be painful trying to wade through the fine print and footnotes to try to find out the actual ongoing price of the unbundled services. Hopefully I haven't made any mistakes in the numbers below.

Bell Fibe: this service has very limited availability so I wasn't going to list it, but the technology behind it is very similar to what Zazeen is using so I thought it worth including. Their entry level package is $43.57/month, plus $13.86 extra for the whole home PVR rental since you don't have a 3-service Bell bundle, for a total of  $57.43/month. If you want to connect a second TV, you have to buy another receiver for $199 or pay a rental fee of $5.53/month. The channels you get are a subset of what Zazeen provides - it's pretty much just the Canadian and US networks, the mandated specialty channels, and TSN. You do get several Galaxie music stations and a few radio stations from across the country though, but the incumbents include those in all of their packages so the value proposition really depends on whether you get any use out of them.

Bell Satellite: their teaser rate is $19.95/month, but that's only available for the first 6 months and only in a bundle with Bell Internet and home phone. Unbundled it will cost you $46.95/month - quite a difference! The channels you get look to be identical or very similar to the Bell Fibe basic package. Timeshifting channels (the West coast feed for those of us in Ontario) cost $5.05/month extra. HD receivers cost $199-499 to purchase and $5.53-13.86 to rent.

Rogers Digital TV: Rogers is actually pretty transparent about the cost of their service, at least on their web site, but maybe that's only because they don't have any promotions going on at the moment. It's $37.85/month plus any rental charges for receivers. HD receiver rental rates range from $7.58 to $25.20 depending on the model and whether or not you commit to a contract. The cheapest no-contract HD receiver rental is $13.08/month. At that price it would only take 6 months to exceed the $75 purchase cost of the Zazeen HD receiver. Purchasing a receiver costs a whopping $323 to $505 depending on the model. The channels you get are essentially the same as what Bell's basic package contains, but with Rogers Sportsnet and the NFL Network thrown in rather than Bell-owned TSN. East and West coast feeds of the Canadian networks are included at no extra charge. If it weren't for the cost of the hardware, this would be the best value next to Zazeen.

Shaw Direct: Shaw is one of the only Canadian BDUs offering a relatively inexpensive entry-level package. Their Digital Lite package is $29.85, but unfortunately they cripple it by preventing you from adding in other channel bundles. This just goes to show that incumbents really don't want pick-and-pay because it would cause the subscriber counts for lots of channels to go way down, and the incumbents own all of those marginal channels so they don't want that to happen. If Canada had stricter rules about media ownership such that BDUs couldn't also own channels, this would be less likely to happen since the BDU would only care about the business of running the BDU, but I digress. For just under $30 you get the Canadian and US networks, the other mandated channels, TSN, and 40 Galaxie music channels. There is no timeshifting and only the Canadian over-the-air channels are offered in HD. A better comparison to Zazeen would be Shaw Direct's Bronze package at $47.46, but that still doesn't include any timeshifting channels. Oh yeah, if you have more than one receiver, Shaw tacks on a $6.05/month charge to all but their most expensive package for a "monthly receiver warranty". HD receivers cost $100-400 depending on the model, although new installations get $60-160 in credits that offsets the cost of the first receiver. I seriously considered the Shaw Digital Lite package when I cancelled Bell Satellite this spring, but it wasn't giving me much that I couldn't already get for free with an antenna.

Summary

At $40/month, Zazeen isn't going to set the industry on its head, but it will certainly make consumers take notice. Some will leave their current provider and switch to Zazeen for the sake of a better value. Some will use Zazeen's pricing to negotiate a better deal with their current provider. In the end, consumers will be better off than before - more competition is always better for the consumer, and right now, Zazeen is competing with the big boys and coming out ahead. Let's hope the beta goes well and they become enough of a threat to shake up the Canadian TV landscape, even if just a little.
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