Development of the Information Highway

Head Table Guests

Montague Larkin, Chartered Accountant and Honorary Director, The Empire Club of Canada; Stanley B. Lacks Jr., President and CEO, Unitel Communications Inc.; The Rev. Kim Beard, Rector, St. Bede and St. Chrispin Anglican Churches; Michael de Pencier, President, Key Publishers; Philip B. Lind, Vice-Chairman, Rogers Communications Inc.; Donna Soble Kaufman, Partner, Stikeman Elliott and a Director, Transalta Corporation; Colin D. Watson, President and CEO, Rogers Cablesystems Limited; Julie Hannaford, Partner, Borden & Elliot and 2nd Vice-President, The Empire Club of Canada; David S. Gergacz, President and CEO, Rogers Cantel Inc.; Ronald Osborne, President and CEO, Maclean Hunter Ltd.; W. David Wilson, President and Deputy CEO, ScotiaMcLeod Inc.

Introduction by Dr. Jackman

I would like to preface my remarks, Mr. Rogers, by thanking you for your impeccable timing in concluding your discussions with Mr. Osborne of Maclean Hunter just two days ago. We at The Empire Club didn't know if that meant we should cancel today's event--since every step of the negotiation had been so well covered by the media--or that you would want to celebrate the occasion by using The Empire Club to address all your several hundred thousand fans in the Rogers Community Cable network, which as you well know is being broadcast live.

This is certainly a week of celebration for you, just as it is for all those Maclean Hunter shareholders who have been waiting patiently for years to see if the stock price would ever vary from its vaguely horizontal performance. In the old days, we used to say "every nickel counts," but now with inflation and Ron Osborne's rephrasing, we all know that "it's every 50 cents that counts."

Two days ago the Rogers annual meeting was held in Toronto's magnificent Art Gallery of Ontario--a building certainly monumental enough to welcome an extraordinary occasion. Ted Rogers and Ron Osborne shook hands in warm agreement over the $3.1 billion deal they had concluded.

And so ended one of Canada's highest profile corporate takeovers. Since the announcement, Rogers intention has so thoroughly dominated the national business media, including three articles in today's Report on Business, that we understand the Globe and Mail was considering renaming the R.O.B. to the R.O.R.

This level of media attention is not new. Ted Rogers has been breaking ground in the communications business for over 30 years. This is not new for his family. His father, and namesake, was an early communications pioneer who developed the technology in the 1920s that allowed radios to work on direct electricity rather than on batteries. His father was also involved in putting the world's first alternating current radio station, CFRB, on the air. In fact, the last two letters of the call sign CFRB stand for Rogers Batteryless.

Most unfortunately, both for Ted's family and for Canada, Mr. Rogers Sr. died when he was 39 and Ted was only five. As a consequence, Ted knows that life can be short and that each day is for accomplishing something special. And there are few Canadians that have accomplished as much.

Ted is now 60. He lives in Toronto with his wife Loretta and they have four children. Ted's many accomplishments were recognized by Canada when he became an Officer of the Order of Canada in 1990.

Young Ted Rogers prepared himself by studying law, receiving his LL.B. from Osgoode Hall in 1961. It was while articling the following year, that Mr. Rogers launched Canada's first commercial FM radio station. Since then he has consistently been at the forefront of new developments in the communications industry.

He was an early entrant in the race to provide cable television services in Canada--a race that has resulted in Canada having the highest rate of cable penetration in the world and made Rogers Communications Canada's largest cable company, serving as of last Tuesday, one-third of Canada's cable subscribers.

In 1985 Mr. Rogers was a founding shareholder of Cantel Inc. providing a national cellular telephone network in Canada. Four years later (1989) he acquired 40 per cent of Unitel Communications. Three years after that, Unitel was granted permission to compete with the telephone monopolies in Canada's public long-distance market. And in 1994, he acquired Maclean Hunter.

Almost one year ago, Ron Osborne at Maclean's Magazine proclaimed today's speaker, Edward S. (Ted) Rogers to be "The King of Cable." Mr. Rogers could be forgiven today if his response then, had been "Look out Ron, you ain't seen nothing yet."

Ladies and gentlemen, please welcome Mr. Ted Rogers.

Ted Rogers

In the three decades in which I have been involved in Canada's communications industry my hobby, as well as business, has been developing and implementing new technologies. The three most important were FM radio, cable TV and cellular telephony. My business philosophy has been to find a need and fill it! There are a lot of new needs to be filled!

While I was in law school in 1960, I purchased CHFI-FM at a time when only five per cent of the homes in Canada had an FM radio receiver. This station has been a great success and today Rogers Broadcasting owns 16 radio stations across Canada.

Few remember what a struggle cable television was in the 1960s! In the early days, cable was a hard sell and there were great financial difficulties. However, we provided a good service which improved people's lifestyles and cable has been a success!

I am also proud of the success the Canadian cable industry has had in supporting and enhancing the Canadian broadcasting industry. The telephone companies were free to provide cable television services in Canada in the 1950s and the 1960s as Ed Jarmain, Syd Welsh and I did, but they didn't believe in broadband, didn't believe in cable and were not prepared to accept the risks of pioneering.

I became involved in the cellular telephone business in the early 1980s. Rogers Cantel's phenomenal growth has exceeded everyone's expectations. Again, cellular has improved and enhanced the lifestyles of Canadians both at home and at work. Rogers' wireless service is now available to 85 per cent of Canadians.

It is against the background of these challenges that I look forward to the development of the information highway. Our vision of the information highway is to use new technologies to enhance and improve our lives, both at work and at home, while protecting and promoting Canadian ideas and Canadian voices.

The information highway is a two-way broadband connection to the home. The Canadian cable industry can provide this highway quickly, at lower cost and more comprehensively, than the projects which have been proposed in other countries.

The cable industry has always been broadband to the home. Some cable television systems have been two-way for quite some time. We owned several cable television systems in the United States, which we sold in 1988 in order to make further investments in Canada. Several of our systems there were two-way, and we have experience in operating these systems. Over the next few years we will be rolling out two-way capability to all of our Canadian systems and many other cable operators in Canada will be doing the same.

The telephone companies already have a two-way local network, but it is narrow band. It has very limited capacity. The cost for them to upgrade their networks to broadband would be prohibitive. They would have to abandon their existing networks and build entirely new ones from scratch. The cost for Canada would be in the $30 billion range or more. This would be prohibitive. Canada is indeed fortunate that in Canada we do not need to incur these expenses or go through the very costly exercises that some other countries are engaging in. In Japan there has been talk of a fibre to the home network by the year 2015. In Japan, unlike in Canada, there is very little cable television infrastructure and the Japanese are discussing this ambitious broadband to the home plan at a cost of $150 billion or more. In the U.S. too, some of the telephone companies have advanced proposals for extremely expensive network infrastructures. In Canada we are blessed with a cable television broadband network which already passes 95 per cent of the homes in this country. This extraordinary broadband penetration rate is unsurpassed anywhere in the world.

The home is, of course, one important part of the information highway but there are others. Canada needs high-speed networking between universities, hospitals, schools and research institutes. We at Rogers are fortunate to have within our cable company the Rogers Network Services division which specializes in the delivery of high-speed data and broadband networks. Already we are working with the universities and schools to deliver cable television and high-speed systems. We can and will do more in conjunction with CANARIE and in conjunction with our colleagues at Unitel and Rogers Cantel.

Our world is changing rapidly. We hear daily about the coming of this information highway and new multimedia services--concepts that are generated both with enthusiasm and with scepticism by some. Many people ask about the services that the information highway will deliver. Last November the Wall Street Journal expressed the concerns of many and wondered if the information highway was a "highway of hype."

But the fundamental truth is that the rapid evolution of electronic communications and computing--particularly on a personal user level--is bringing us to a new era which will change how we will all work and live. Integrating computing, communications, information, and entertainment systems is no longer a distant dream. We are indeed on the eve of seeing personal computers that can show movies, televisions that take you into virtual shopping malls and even individual stores, wireless fax and data transmission and electronic travel.

This brings me to our strategic merger with Maclean Hunter.

In the race to build the information highway of the future and to develop the services that these highways will deliver, Canada is starting well behind. Yes it's true we have the greatest penetration of broadband network to the home of any country in the world. But Canadian companies are small and under-financed by world standards. We do not have companies like Time-Warner and Murdoch which can combine resources in many different fields to create new multimedia services. Our cable industry is fragmented.

This strategic merger of Rogers and Maclean Hunter will change all this. It will result in a strong new Canadian company which combines industry-leading publishing and broadcasting resources to create new ways to tell Canadian stories, using the latest in multimedia technologies.

To preserve a unique and distinctive Canadian voice, we must take steps now to create the Canadian equivalents of a Time-Warner, a Murdoch. We must give Canadians unique new services, with more opportunities for emotional closeness, more opportunities to hear and tell Canadian stories. We must harness the new technologies for the benefit of all Canadians. This strategic merger will do this.

Today, the Canadian cable industry faces a huge competitive threat from U.S. based direct broadcast satellite services. These new satellite services will rain down hundreds of foreign programming services on Canada. The cable industry must respond by offering new and better services and more choice. Otherwise, Canadians will abandon the Canadian broadcasting system.

As well, the telephone companies have not been shy about their interest in entering the multimedia market. A fragmented cable industry has little chance of responding to the competitive threat posed by the telephone monopolies.

This strategic merger will respond to both of these competitive threats. Strong regional cable companies can better serve subscribers by developing greater operating efficiencies, resulting in more uniform services, rates and higher levels of customer service. This merger will strengthen the cable industry, equipping it to better compete with foreign direct broadcast satellite services and the telephone monopolies in the future. Most importantly, it will help to ensure that Canadians have a choice in the information highways and services available to them.

We will now go forward together facing the challenges of public and regulatory scrutiny. I have already set out a number of the reasons why this merger would be in the public interest. But I also recognize that this merger will bring with it important responsibilities.

A diversity of voices and ensuring access for this diversity of voices has long been a key element of Canadian broadcasting policy. Rogers has been a leader in the industry on this issue. We have established our own access policies which exceed those established by the industry generally.

In the multimedia environment of the future, we must broaden these policies to ensure that there is fair, open and equal access for all voices, from Chatelaine to The Toronto Star, from CBC News world to MuchMusic. We may be developing the highway--but everyone will be able to travel on it.

We believe that this merger is in the interest of our two companies and in the interest of all Canadians. It is an opportunity to strengthen the Canadian communications system now and in the future. It is an opportunity which we must seize and act upon. Thank you very much.

The appreciation of the meeting was expressed by Julie Hannaford, Partner, Borden & Elliot and Second Vice-President, The Empire Club of Canada.