On the Hot Seat with Keith Galitz

On the Hot Seat with Keith Galitz

Canby Telecom, an 11,000 access-line ILEC in Canby, Ore., launched an IPTV service in October 2005 and now has north of 1,000 video customers. The company serves 8,500 homes with voice, broadband and a TV service featuring video-on-demand, an interactive program guide and a nifty alternative to those pesky handset searches during a favorite show--on-screen caller ID.

Keith Galitz, a former executive with Qwest, took over the phone cooperative as president and general manager in March 2004. His journey from a multibillion dollar carrier serving 14 states to a 103-year-old local co-op serving an 84-square-mile area began conventionally. (Galitz will also share his knowledge in a "lessons learned" panel at IPTV Evolution, a FierceMarkets event held in conjunction with the Internet Telephony Conference & EXPO at the Los Angeles Convention Center Sept. 10-12. Click here to find out more.)

"I lived north of here and play golf at the local country club," Galitz said. "The prior president and I played golf together, and I told him if he ever retired, I wanted to apply."

Galitz came to Canby just as the board was exploring a video play. He spoke with FierceIPTV Editor Deborah McAdams about the resulting endeavor.

FierceIPTV: What influenced the decision to launch IPTV, particularly before the technology was proven, and in some cases, available?

Galitz: We turned 100 years three years ago, and prior to that, we did lot of customer surveys. What came out was that they wanted another choice other than the cable company. We came up with a plan and took it to the board, and the board approved. We did quite a bit of research; visited other telephone companies. The business plan took us roughly three months.

FierceIPTV: What other telcos were already doing IPTV?

Galitz: Pioneer Telephone in Kingfisher, Okla., was just launching IPTV. Ringold Telephone in Ringold, Ga. had already launched. We talked to them quite a bit, and went to another company, Panhandle Telephone in Guymon, Okla. We also went to SureWest in Sacramento. It was using all fiber.

FierceIPTV: What was the most difficult part of deploying IPTV?

Galitz: There were a lot of difficult parts. Negotiations with programmers were extremely difficult and time consuming. It took a lot more time than we anticipated and delayed the launch more than anything else. We'd been warned that it could take up to a year to negotiate, so we started very early on. [Canby launched before all the desired programming deals were done.] We added Fox networks late, for example.

Because of programmers, we had to do encryption, but the technology was relatively new. That's the reason Fox was delayed. We encrypt at the headend. Canby is a Tut headend using Myrio Matrix for encryption.

FierceIPTV: What was biggest expenditure--infrastructure or programming?

Galitz: Programming is our biggest uncontrollable expenditure. It's the only number that we've not hit. It's uncontrollable because you've got to take what they want, when they want, when they tell you. All of our other numbers have been pretty darn close.

FierceIPTV: Was it hard to get programmers into meetings considering Canby's size?

Galitz: Yes. Although we got most of the programming through the NCTC [National Cable Television Cooperative], we… negotiated with ESPN, Fox and NBC Universal. We only wanted four [Disney-owned channels], but we had to take eight. Those negotiations took over a year. Most deals were for five to seven years, although they're coming back longer.

FierceIPTV: Did you walk away from any negotiations?

Galitz: No, you couldn't walk away from any of them. Our vice president of finance and regulatory did them and our engineers went to assure them the programming wasn't going to end up on the Internet.

FierceIPTV: Does another cable company serve the area?

Galitz: A small local company. Canby had a cable company. We sold that off, four-and-a-half year ago. We had a one-year, non-compete agreement, and then entered IPTV two-and-a-half years after we sold.

FierceIPTV: Is DBS fairly pervasive in the market?

Galitz: Satellite is a factor in this community. Cable was not a quality product, so before us, people turned to satellite.

FierceIPTV: What's the incentive for people to leave satellite for Canby's video service?

Galitz: We can provide a bundled package of broadband, entertainment and voice. Satellite can only do entertainment. Customers only want one vendor to deal with.

FierceIPTV: Describe the infrastructure and build-out. Did you start with fiber-to-the-node? How much of the network is now fiber-to-the-home? Is 100 percent FTTH the goal?

Galitz: We're doing fiber to all new home developments and overbuilding in other areas. We don't think it's necessary to do 100 percent fiber, but we want to get as much as possible. Bandwidth is the deciding factor for phone companies. You've got to have a quality broadband network.

FierceIPTV: So for an 8,500 household market, it's worth investing in fiber? (Published reports indicate Canby has put $3 million into it's new network.)

Galitz: You bet. It's worth going for a chunk of those households.

FierceIPTV: Canby managed to pay out $1 million in dividends last month. Is the phone business booming?

Galitz: The company is very strong financially. We have retained earnings. From time to time, the board says we're not going to need that money. People receive a credit to their account annually.

FierceIPTV: Canby offers two tiers of broadband for $40 and $50 as well as dial-up for $20. Are people still using dial-up?

Galitz: It's shrinking. I don't think anybody in the industry believes dial-up has a lifespan. We're growing broadband faster than dial-up is shrinking--that tells me we're taking business from the cable company. We're down to 633 dial-up customers, and we have more than 4,200 broadband customers.

FierceIPTV: Canby charges $200 for an unreturned set-top. Is that your cost?

Galitz: I think it's about the range. Initially, the boxes were more expensive, and it's a fairly basic box. There's no PVR [personal video recorder]. We've got to have more bandwidth to do a better offering.

We're at MPEG-2, so we don't offer PVR or HD [high definition]. We are working on a strategy to do HD.

For a PVR solution, we'd rather do a network PVR than a set-top solution. We would store programming at a headend, each customer would have access to the full library.

FierceIPTV: What does going MPEG-4 involve?

Galitz: A significant capital investment, or you've got consolidators. There's IP-Prime, and Avail Media, which used to be Aurorus. It's the same as IP-Prime. We're going to look at them, I would hope in the next six months.

FierceIPTV: How are the Amino set-tops working with the Myrio middleware? Are there glitches?

Galitz: We're not happy with Myrio. They're slow with delivering upgrades to their middleware. We're looking at other options.

FierceIPTV: What kind of feedback have you had from customer/members?

Galitz: Overall, very positive. We're starting to run into customers who want HD, and we're looking at making improvements to the remote. It's a confusing remote for older people.

People do like the way we deal with them. They talk to a human being. Our service levels are superior to cable, but we know we have to launch HD and PVR.

FierceIPTV: Does Internet TV delivery--streaming video on computer screens--threaten to undermine these type of physical IPTV deployments?

Galitz: That's a debatable subject in our company, but it's no different from movie theater business. When DVRs and VCRs came out, people said, "oh, the movie theaters are dead," but they're not. I believe people will still want a family entertainment night in front of the TV.