Canadian Journal of Communication, Vol 16, No 3 (1991)

The Videotex Industry in Québec: The Difficulties of Mass Marketing Telematics

Serge Proulx (Université du Québec à Montréal)

I will try to do an overview of the implantation of the videotex industry in Québec. Where are we now? Given general tendencies and constraints, as well as the dynamics of the participants involved, what are some possible scenarios for a mass-market telematics in Québec during the 1990s?

Elements of Historical Background

As early as the end of the 1960s, the Canadian federal government tried to be both an international innovator and an industrial motivator in telecommunications.

On the one hand, as early as September 18, 1969, the new Department of Communications of Canada created a study group--the Telecommission--whose mandate was to "study the current situation of telecommunications in Canada and prospects for the future." In addition to receiving advice from the provincial governments and memorandums from concerned organisms, this group commissioned over 40 studies "involving constitutional, judicial, economic, international, sociological, technological and institutional areas, as well as that of legislation." It completed its work with the publication in 1971 of a "report on telecommunications in Canada" entitled Instant World (Univers sans distances in French). Although this report did not claim to represent the federal government's viewpoint, it certainly helped to fuel social debates over industrial and governmental initiatives that (to many participants) seemed necessary to ensure Canada's international leadership in telecommunications. Following this report, the federal government published a steady stream of reports on the "information society" and the "telecommunications era": the most recent appeared in 1987. The government also produced a number of papers, policies and rulings in these areas of telecommunications. But there has always been a large gap between what the Canadian government says about telecommunications and telematics and what it does with this new technical apparatus that borrows equally from telecommunications, computer science and the audio-visual.

On the other hand, some activities of the Canadian Department of Communications consisted of laboratory work whose goal was to produce new technical knowledge appropriate to communications; such knowledge could eventually be transferred to private firms who could use it for commercial purposes. According to Jean-Claude Guédon (1989, pp. 69-70), these "governmental laboratories" never produced the anticipated results, partly because the government's structure and goals differ from those of private enterprise.

Attempts to introduce videotex in Canada arose in this context, resulting in a long series of half-successes and failures. We can consider the important human and material resources employed by the Canadian government after 1975 to set up the technological system Telidon. All of these efforts failed to accomplish the creation of a telematics system for a mass audience covering all of Canada (like the French government's Minitel/Télétel system). Rather, the result was merely the constitution of a technological format that ultimately had to adapt itself to the one adopted by the Americans (NAPLPS). A mistake was made here: reacting to Canadian public opinion, the federal government tried to pass off Telidon's very real failure to be accepted internationally, as a "success" in establishing an international technical format. Thus, at the time of the "international success" of the Telidon format, in 1981, the Canadian Minister of Communications, Mr. Francis Fox, could go so far as to talk about an "important success for Canada" (Giguère, 1987, pp. 43-44, quoted by Guédon, 1989, p. 72). But, as Jean-Claude Guédon writes,

The marketing of a communications protocol does not present the same problems as that of a traditional technical object. In other words, one cannot promote a locomotive, which is a technical object, in the same way as the width of a railway track, which is a protocol for locomotive circulation. (Guédon, 1989, p. 71)

The first serious attempts to adapt the Telidon format to effective technical systems coincided with a $10 million deal signed on August 28, 1979, between the Canadian government and Bell Canada, for the realization of the Vista project. The initial goals of this project, to produce 100,000 screen-pages and install 1,000 terminals, were later made less ambitious. The project was finally abandoned by Bell Canada in 1983. As for the Telidon experience as a whole, after a five-year period of field experiments where the government invested $65 million and private enterprise just as much, the Minister Marcel Masse announced its official demise in March 1985. Bell Canada, for its part, having first hesitated, then abandoned the idea of importing Minitel into Canada, decided in 1987 to develop its own videotex system, Alex, that functions according to an alphageometrical format that is a subdivision of the NAPLPS one.

The Social Dynamics of Participants in 1990

Telematics is shaped through controversies sustained by its various promoters, as well as by other social agents who are concerned with the development of these technological systems. We can include among these agents the provincial and federal governments and their agencies, peripheral consulting or control firms, consumer-protection agencies, groups of potential users, and so on. Up to now, the more controversial issues have been in the areas of transmission standards, the presentation of information on screen, user fees, and communication strategies implicit behind the implementation of technical systems.

We can now identify the main groups involved in current attempts to introduce telematics to a mass market in Québec.

(a) Promoters: two large private corporations are in the lead: Bell Canada, which has marketed its Alex since 1988, and Videotron, which has been offering its Videoway since January 1990.

(b) Governments: both the federal and provincial levels of government appear to hope for the success of the above projects. Their financial commitment, however, is not very high. Federal support has remained constant since 1969. However, although it invested $65 million between 1980 and 1985, the Canadian government has since dismantled its teams of functionaries tied to the videotex dossier and no longer provides grants. The Québec government has chosen to participate directly in the telematics industry by investing $750,000 in 1989-90 in a pilot-project that turns the Québec government into a supplier of important services for the Alex network (Rompré, 1989). This investment, however, appears minuscule relative to the Canadian market, evaluated at $120 million.

(c) The services suppliers: they are the weak link in the chain of participants. Until the number of suppliers increases, the various networks will not succeed in attracting enough subscribers to make any project solvent. There are between 150 and 200 enterprises working in the videotex industry in Québec (La Salle, 1989). At the moment, Loto-Québec, the Mouvement Desjardins and the Government of Québec are the most important suppliers.

(d) Users: no promoter has ever shown that "general public" have "specific needs" for telematics. The videotex does not seem to attract firsthand a family clientele, who would be the preferred targets for mass-marketers. The telephone is still the favourite choice for people who want to satisfy their needs for interpersonal communication.

In addition, phone bills in Québec are usually relatively modest; there is no tradition in Québec of high rates for telecommunication activities, which makes the videotex service less attractive because it is relatively expensive. It is unlikely that a videotex network can be profitable without having at least 100,000 active subscribers, and for such numbers to occur, it would be necessary to lower user costs radically.

With regard to professional clients, the Québec market of information services (data banks) is evaluated at about $12 million:

We estimate that the Québec supply does not satisfy more than half of internal demand, the difference being filled by American and Canadian services.... We estimate that these services, such as access to data banks and electronic billboards, should have an average annual growth rate of about 64%. (Martin, 1989, pp. 21-22)

Two Different Images of Telematics: The Terminal
Versus the Television Set

At least two different images of telematics are developing in Québec: (a) One of these images involves the use of a terminal or microcomputer, and of the phone lines; such an approach entails billing adjusted to use, and is most appropriate for business clients or groups with specific interests; there is a risk of never reaching the general public (even though Bell Canada's explicit objective is to reach a mass market). (b) The other image involves the use of a television set, and of the cable distribution network; in this case, fixed monthly billing gives subscribers the possibility of unlimited use of some telematics services, in addition to pay-TV channels and specialized pay services. Let us look at the two approaches in more detail.

Bell Canada's Alex Project

With the agreement of the federal Department of Communications, Bell Canada, the largest telephone company in the country, has put the Alex system into effect and has been attempting to popularize it in Québec since December 1988. This network allows its subscribers (provided with an Alextel terminal rented at $7.95 per month or a microcomputer equipped with simulation software and a modem) to have access to many services: home banking, leisure, compushopping, travel and transportation, current events and information, sports, education, games and lotteries, electronic billboards and party lines, and so on. Billing adjusted to use and activity is in effect. In January 1989, Alex had 110 services originating from about 40 suppliers. In November 1989, Alex offered almost 450 services provided by 120 suppliers (La Salle, 19 89). Bell Canada has invested $60 million into this project and expects that service suppliers will add about $50 million.

The launching of the project was well publicized. In December 1988, it was announced that the objective was to quickly attain 20,000 subscribers in Greater Montréal.

As of April 23, 1989, ALEX had 10 477 subscribers using 5 414 Alextel terminals and 5 063 microcomputers equipped with emulators. The number of calls had passed 400 000, with an average duration of 7.5 minutes per call. (Bernatchez, 1989, p. 18)

However, one can observe that: (a) Most first-time users, after a free two-month trial period, returned their terminals to Bell Canada, which means that there has been a very quick turnover among new users. (b) After receiving their first phone bills, which showed prohibitive costs for the Alex service, many subscribers gave up on the very idea of using this type of service, while others formed the Association of Users of Alex Services to encourage Bell to lower its rates. (c) The suppliers have too few clients (there is an average of 5,000 hours of connections per month, which is insufficient to make the network profitable [La Salle, 1989]); as a consequence, they lack the financial resources to improve service: it becomes hard in turn to attract new subscribers. A vicious circle is created that hinders the development of the system.

Videotron's Videoway Project

The commercial implantation of the system began at the end of January 1990, after a two-year trial period in a Montréal suburb (800 homes in Brossard). Videotron invested $25 million to develop the concept and prototypes (from 1981 to 1986), and $35 million to increase the capacity of the network (from 36 to 52 channels) and manufacture the first 50,000 terminals. At the end of January 1990, there were 3,000 subscribers to the Videoway system in Greater Montréal. Videoway is an interactive system with multiple uses offered by the most important cable distribution company in Québec.10 The system uses a coaxial cable network with a high speed of transmission and an easy use of colour, as well as a box connected to the subscriber's television (a box that is at once a cable converter, a decoder for the hearing-impaired, a descrambler for pay-TV, a multi-format videotex terminal giving access to internal and external data banks, and a power-cut telecontroller). The software includes a circuit that contains the user's personal electronic address.

Subscribers can "interact" with their television sets in a number of ways. For instance, for some live hockey games, viewers can use their remote-control devices to choose what shots of the game to put on screen;11 they can also take part in question-and-answer games broadcast on regular television channels; there are in addition a dozen fictional television series created by independent producers where the subscriber has a say in the progress of the story. Some practices involve the use of various videotex services: there were 75 of them at the start of 1990 (for example, stock market quotations, home-buying services, classified ads, horoscopes, video games, access to data banks, information on movies or plays showing in Montréal, and so on). It is these videotex services that compete directly against the Alex network.

By adding various interactive services gradually (unidirectional ones in 1990; bidirectional ones in 1991] and by conducting permanent evaluative research, Videotron hopes to attract 50,000 subscribers to Videoway in Greater Montréal by August 1990 (at a rate of 7,000 or 8,000 homes per month),12 and 250,000 subscribers within the next three years. Their target market consists of the 850,000 present cable subscribers in the region who are already paying to obtain supplementary services (Thibault, 1989, p. 5). They hope to offer the service in the Québec City region by the end of 1991. With a fixed rate system ($18.95 per month, including a pay-TV channel), Videotron hopes to turn Videoway into a telematics service for the mass. Its fixed billing rate may be an advantage relative to Bell Canada, which bills Alex users by the minute, and which in this way runs the risk of turning Alex into a specialized service for businesspeople.

Possible Scenarios Regarding the Development of a Mass-Market Telematics in Québec

It is not obvious whether a mass-market telematics can succeed in Québec during the 1990s.

1. Among the many possible scenarios for a mass-market telematics in Québec, we must certainly keep in mind the scenario of complete failure. There is after all a fairly long Canadian history of industrial failure in the videotex sector. Four reasons were cited to explain the failure of the preceding Telidon experiment: (a) Canadian investments were insufficient; (b) the terminal was too expensive to manufacture, which prevented mass production; (c) the industries, preoccupied by technical aspects, expended too little effort on content and services; (d) a relatively long amount of time is necessary for users to become used to the new service. Similar problems could eventually lead to a new failure for telematics in Québec.

According to Michel Cartier (1988, pp. 26-32), the main constraints to the development of videotex in Québec appear to be the following: (a) The potential market is too small: Québec is an island of 6 million francophones in a sea of over 220 million anglophones. The difference in languages complicates the eventual transfer of products and services from Québec to the rest of North America, a transfer which is after all a major condition for economic success. Given this situation, the suppliers of services are too few. (b) There is a marked lack of research and development, particularly regarding the needs of potential users and the development of content and services that can fulfill users' needs. Promoters have until now been content to reproduce, for the development of videotex, the unidirectional mass- media model without promoting the potentials of interactivity sufficiently. (c) Promoters have poorly evaluated the capacity of users to pay for the services offered, in a context where Quebecers are not accustomed to an "economy of meters" in the billing of their telephone transactions.13

2. At the other extreme, we could on the contrary imagine a scenario of complete success, which would involve complementarity between the services being offered: for instance, Bell Canada's project could eventually become exclusively oriented towards business clients,14 while Videotron could become the main supplier of telematics for a mass audience, with interactivity and home buying as its major selling points. Given notable American commercial failures (Martin, 1989, p. 21), we are now in a position to identify a certain number of success factors:

(a) A critical mass of users (from 100,000 to 200,000) and of service suppliers; the major challenge for promoters certainly remains to encourage consumer demand (by a better targeting of users, notably);

(b) Reasonable rates for a service that is more varied and of a higher quality and that does not have equivalents with other supports: the consumer must recognize a competitive advantage in using this new technology;

(c) Service suppliers who are ready to involve themselves and to bid for quality services and content (efforts up to now have been too exclusively centred on technical developments or on a search for short-term profit15);

(d) An appropriate technology, quick (the systems are too slow at this time) and easy for the user to learn,16 integrating a multi-format approach;

(e) Sustained marketing efforts that take into account the fact that consumers will initially show resistance towards the service because of its novelty; it will take time for them to become used to this new technology, and periodical readjustments of commercial strategies will be necessary;

(f ) The support of governments for the development of this industry (research and development grants, direct participation as suppliers of services, and appropriate legislation).

(3) It is likely that an intermediary scenario will arise: for instance, the success of only one of the two main projects, or again the integration of one or the other into more sophisticated systems, of the ISDN17 type. It is not impossible, furthermore, that we find ourselves in a situation where two or more commercialized ISDNs are actively competing against each other, be they Bell Canada's, Videotron's, or some other participant's (such as, for instance, the Réseau des caisses populaires Desjardins's). We must keep in mind that the current commercialization of videotex services in Québec is occurring in a market where many alternatives are available to users looking for specific information: access to many data banks in North America through the use of a microcomputer and a modem is the most important alternative. In this context of many choices, it is probable that a "multi-format" approach (involving ASCII, Teletel, NAPLPS) will come to dominate the various major projects.

4. Ultimately, it is market demand that will determine the form and position of the various competing networks. For the moment, it is the business sector that is in sustained growth. Alex seems to be orienting itself gradually towards business clients and towards large organizations with specific needs. Videoway, on the contrary, has chosen to occupy the "mass market" niche, its selling points being interactive television services. We do not yet know whether such an activity will become a lasting way of using the television set, or whether it will be looked upon as a fad and, consequently, be quickly forgotten.

But, for promoters of a "mass market" videotex in Québec (and in North America as a whole), the ultimate objective seems to be the implantation of video-homeshopping , the transformation of the home into a personal shopping centre via an electronic catalog that would be accessible at all times, by day and by night. Many retailers appear ready to invest in telematics: they are simply waiting for the moment when they will feel that telematics networks are sufficiently developed and when the public appears ready to play this new commercial game! (Leblanc, 1989) In such a context, videotex seems to be less and less a communication apparatus leading towards a new degree of sociability, and more and more a simple marketing tool.

Notes

1. This paper was prepared for a communication at the XVIIth Conference of the International Association for Mass Communication Research (IAMCR), Bled (Yugoslavia), August 26-31, 1990. Translated by Eric Spalding.

2. Univers sans distances, 1971, p. xi.

3. See Communications Canada, 1987.

4. For an autopsy of the Telidon experience in Canada, see Giguère (1987) and Guédon (1989), from whom we draw information here.

5. "North American Presentation Level Protocol Syntax."

6. According to sources who wish to remain anonymous, it was under pressure from the Canadian Department of Communications that Bell abandoned its project of importing the Minitel. At the time, the Canadian government was seeking to position itself on the international videotex market in a significant way.

7. For a presentation of technological controversies analysis, see Callon, 1981.

8. At $18 per hour, one hour of use per day leads to a monthly bill of over $500!

9. The association (70 members) has many goals: to promote telematics as a means of communication, to link users with producers, to provide technical assistance to users, to get Bell to lower its rates. The association maintains that the average age of Alex users is 30 years, that they come from all levels of society with an average annual income of $28 500, that their first monthly bill was $600 on average, later stabilizing around $300 per month (Bonneau, 1989). In December 1989, Bell Canada presented a request to the CRTC for a sizable lowering of its rates (seven billing levels, no charge for time spent accessing the program, and detailed bills), applicable starting on April 30, 1990 (Laberge, 1989).

10. Videotron had 957,172 subscribers as of July 31, 1989.

11. This type of interactivity never offers more than four choices.

12. As of December 17, 1990, 52,000 terminals were installed.

13. A study done in Washington in 1987 by the Videotex Industry Association indicated that the North American consumer did not want to spend more than $12 a month for this new service.

14. Bell Canada seems to be going in this direction and changing its initial goals of a mass-market telematics: its Mediatel enterprise, responsible for the implementation of a telematics that from now on will include "Inet 2000," "Envoy 100," and "Route Commerce" (all created for business clients).

15. Service suppliers cannot expect to recoup their investments within two years at least.

16. The Videoway strategy is ahead of Alex's here, for its subscribers will not need as much training to use their new decoders: they are already used to the remote-control device and thus will not have to introduce a completely new object into their homes. However, the new Videoway keyboard does add a dozen new function keys to the traditional keyboard, keys that belong to a more complex level of interaction: the four choices of interactive channels, the "preferred program" function, navigation keys, game keys, and so on. Some specialists consider that this new keyboard is three times more difficult to learn than the traditional keyboard. Videotron has given over one of its television channels to the teaching of the new keyboard to beginners.

17. Abbreviation of "Integrated Services Digital Network."

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