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Rogers Communications, Inc.  The Wave Case Analysis Prepared by: Samy Gennaoui Amos Tsay William Wong Hongyan Xiao Mark Bundang For: MBA 610 August 8, 2007
Agenda ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Agenda ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Main Issues Facing Rogers In November, 1995, Rogers Communications, Inc. was poised to become the world’s first cable television company to sell high speed access to the Internet over its cable lines.  Named Rogers WAVE, the project would take Canada’s largest television and cellular telephone operator into an unfamiliar and unpredictable market. 1 st  Decision to make Rogers Communications, Inc. must decide  whether or not to proceed  with the plan to provide a service of high speed access to the Internet over its cable lines. 2 nd  Decision to make If Rogers decides to proceed with the launch of such a service, then the company must then decide the details of this launch:  target a niche or mainstream market .
Background Current sources of Rogers’ revenue % of revenue
Agenda ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Internal Analysis Strengths Weaknesses ,[object Object],[object Object],Rogers Cable’s growth comes mainly from adding channels Revenue growth b/w ’93 and ’94 was  68% Largest cable TV & cell-phone operator in Canada Impressive revenue growth during the period of ’92 to ‘95 Diversified in media and telecommunication Used to taking initiatives / Proactive management for R&D Existing coaxial network in Ontario and BC Customers have high price perception of Rogers Low diversity of revenue growth Rogers does not have any previous Internet service providing experience “ Negative option” left bad taste in the  mouths of subscribers The board is reluctant to invest
External Environment Analysis Opportunities Threats Becomes important when Rogers expands into Business segment Computer Jocks  and the  Aware  are amazed by speed of cable connection and are  willing to pay  $50/month ADSL technology will need 3 to 5 years before commercialization –  Potential First Mover’s Advantage  for Rogers  Participation of other companies in development of cable Internet 70% computer penetration foreseen by 2000 / Internet users doubled yearly New Internet contents/applications are more rewarding at high speed Neophytes  see Internet as just entertainment and are  not willing to pay higher rates  before experiencing. ADSL expected to be faster than cable internet. Bell  can cross-subsidize its new services and cause  major price competition.  It also has  major brand recognition T-1 is a more competitive technology in commercial segment 163 existing ISPs in Canada with experience.
Important Environmental Factors Two sides to every coin Technology and regulations are allowing convergence of Cable TV, Telephone, and Computing Major Opportunity Potential for  Rogers to become “full service” network  and compete with Bell in their market Major Threat Satellite TV and telephone companies allowed to offer cable TV – Potential for companies like  Bell and DirecTV to compete with Rogers in its own market .
Agenda ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Alternatives Status Quo No implementation of cable internet across Rogers' network for now . Offer cable access to the Internet as a   Service to a Niche market   Offer cable access to the Internet as a   Service to a Mainstream market Cable Internet Decision 1 2 3
Alternatives ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Status Quo 1
Alternatives Service to a Niche market ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],2
Alternatives Service to a Mainstream market ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],3
Agenda ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Recommendation and Rationale Profitability Required Capital Protection of existing customer base Growth potential A B C D Decision Criteria Service to a Mainstream market 3
Recommendation and Rationale Status Quo Service Launch ,[object Object],[object Object],[object Object],[object Object],[object Object],1 2 3 1 st  Decision to make Does Rogers provide the service or not Required Capital A Profitability B
Financial performance of Rogers Communications, Inc. Revenue Net Income (loss) Loss trend ’92 to ‘95 Net Loss =  decrease of 57% Revenue growth overall = 130% Capital Exp’s =  increase of 46%
Recommendation and Rationale Status Quo Service Launch ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],1 2 3 1 st  Decision to make Does Rogers provide the service or not Required Capital A Profitability B Protection of existing customer base C Growth potential D
Recommendation and Rationale Service Launch 1 st  Decision to make Does Rogers provide the service or not Required Capital A Profitability B Protection of existing customer base C Growth potential D
Recommendation and Rationale Niche Mainstream ,[object Object],[object Object],[object Object],[object Object],2 3 2 nd  Decision to make Target a niche or mainstream market Required Capital A Profitability B
Estimated 1 st  Year Financials for Newmarket launch of WAVE 70% computer penetration foreseen by 2000 /  Internet users doubled yearly Opportunities 160  (1% of 16,000) 800  (5% of 16,000) Recurrent Costs = $272,000  (independent of # of customers) Expected penetration: Mainstream:  5% at $30/month Niche:  1% at $50/month Conservative forecast: New users are likely to pay more than $30/month in the future
Recommendation and Rationale Niche Mainstream ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],2 3 2 nd  Decision to make Target a niche or mainstream market Required Capital A Profitability B Protection of existing customer base C Growth potential D
Recommendation and Rationale Mainstream 2 nd  Decision to make Target a niche or mainstream market Required Capital A Profitability B Protection of existing customer base C Growth potential D
Recommendation and Rationale Evaluation of Alternatives based on Decision Criteria Status Quo Niche product   Mainstream product Rating Scale 1 to 5 for each criterion (1 = poorest rating; 5 = best rating) 11 12   15 Sum of ratings (max 20) 1 2 3
Recommendation and Rationale 1 2 Evaluation of Alternatives based on Decision Criteria Status Quo Niche product   Mainstream product Rating Scale 1 to 5 for each criterion (1 = poorest rating; 5 = best rating) 11 12   15 Sum of ratings (max 20) 3
Agenda ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Timeline JAN ‘96 JUL ‘96 JUL ‘97 JAN ‘99 Offer cable internet in  Newmarket  and a  few selected locations  across  Ontario  and  BC Jan ’96 (launch) Upon success of launch in  initial  locations, use  revenues  (and secured future revenues) obtained to  finance progressive launch  in other selected locations Jul ’96 (6 mos.) Continue expansion  to have a coverage spread across Ontario and BC Jul ’97 (18 mos.) To be  prepared against launch of ADSL , cable internet should be accessible to most of Roger’s cable subscribers Jan ’99 (3 yrs)
Tactics Financial advantages  to progressive launch in various locations ,[object Object],[object Object],[object Object],First-mover advantage ,[object Object],[object Object],[object Object]
Control Responsible staffs Approaches Types of Control  Purpose  Plan Project Manager (coordinate financial, sales and technical managers)  Pricing Strategy, Product offering Evaluate  achievement of forecasts Profitability Financial Manager Financial analysis, Sales-to-expense ratios Examine the  real time financial  situation  Efficiency  Sales Manager Sales force, Advertising, Sales promotion Evaluate and improve  impact of marketing  expenditures Field Progress   Technical  Manager Installation, Customer service center Examine the progress of  installations and service support Assign a  project manager  reporting to V.P. Marketing
Agenda ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Conclusion Offer Cable Service and How Main Issue Analysis of Internal Competencies and Environmental Factors 1st Status Quo, Niche, or Mainstream 2nd Launch to Mainstream in Newmarket 3rd Progressive Growth in Ont and BC 4th Established as a Full Service Provider before Bell  Finally
Thank you for your Time! Any Questions?
Appendix
Segmentation patterns and demographics * 1995 Commercenet / Neilson survey **1995 Angus Reid Group Survey Home and Business users* US and Canada Canadians with Internet Access** Canadian Population Households with  computers 29.4 million people 11.1 million households Households with  Computers and  modems ,[object Object],[object Object],3.2 million households (28.8%) 1.3 million households (12% of all households) (42% of all households w/ computers) ,[object Object],[object Object],Usage Time* US and Canada
Focus groups Focus Groups - July 1995 Before  prototype usage Focus Groups - October 1995 After  prototype usage ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Advantages of cable access over other forms in the market Comparison of Data Transmission Rates Analog –  28.8 Kbps Digital –  128 Kbps 1.54 Mbps 500 Kbps Increasing Relative Access Rates Comparison of Installation/Modem Costs Decreasing Cost ($)
Estimated 1 st  Year Financials of WAVE in Newmarket, ON Newmarket Population Target Segment 50,000 people 16,000 households passed by Rogers cable Revenue Generated from 1 st  activity Niche (1%) 160 households Mainstream (5%) 800 households Costs associated with WAVE and adding subscribers $272,900 $272,900 ,[object Object],$1,183,002 $722,202 ,[object Object],$334,102 $334,102 ,[object Object],$115,200 Niche (160) $576,000 ,[object Object],[object Object],Mainstream (800) $268,000 $112,000 ,[object Object],$80,000 $16,000 ,[object Object],$96,000 Niche (160) $288,000 ,[object Object],[object Object],Mainstream (800)
Questions to answer for roll out ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

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MBA 610 Marketing Management Case Study

  • 1. Rogers Communications, Inc. The Wave Case Analysis Prepared by: Samy Gennaoui Amos Tsay William Wong Hongyan Xiao Mark Bundang For: MBA 610 August 8, 2007
  • 2.
  • 3.
  • 4. Main Issues Facing Rogers In November, 1995, Rogers Communications, Inc. was poised to become the world’s first cable television company to sell high speed access to the Internet over its cable lines. Named Rogers WAVE, the project would take Canada’s largest television and cellular telephone operator into an unfamiliar and unpredictable market. 1 st Decision to make Rogers Communications, Inc. must decide whether or not to proceed with the plan to provide a service of high speed access to the Internet over its cable lines. 2 nd Decision to make If Rogers decides to proceed with the launch of such a service, then the company must then decide the details of this launch: target a niche or mainstream market .
  • 5. Background Current sources of Rogers’ revenue % of revenue
  • 6.
  • 7.
  • 8. External Environment Analysis Opportunities Threats Becomes important when Rogers expands into Business segment Computer Jocks and the Aware are amazed by speed of cable connection and are willing to pay $50/month ADSL technology will need 3 to 5 years before commercialization – Potential First Mover’s Advantage for Rogers Participation of other companies in development of cable Internet 70% computer penetration foreseen by 2000 / Internet users doubled yearly New Internet contents/applications are more rewarding at high speed Neophytes see Internet as just entertainment and are not willing to pay higher rates before experiencing. ADSL expected to be faster than cable internet. Bell can cross-subsidize its new services and cause major price competition. It also has major brand recognition T-1 is a more competitive technology in commercial segment 163 existing ISPs in Canada with experience.
  • 9. Important Environmental Factors Two sides to every coin Technology and regulations are allowing convergence of Cable TV, Telephone, and Computing Major Opportunity Potential for Rogers to become “full service” network and compete with Bell in their market Major Threat Satellite TV and telephone companies allowed to offer cable TV – Potential for companies like Bell and DirecTV to compete with Rogers in its own market .
  • 10.
  • 11. Alternatives Status Quo No implementation of cable internet across Rogers' network for now . Offer cable access to the Internet as a Service to a Niche market Offer cable access to the Internet as a Service to a Mainstream market Cable Internet Decision 1 2 3
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  • 16. Recommendation and Rationale Profitability Required Capital Protection of existing customer base Growth potential A B C D Decision Criteria Service to a Mainstream market 3
  • 17.
  • 18. Financial performance of Rogers Communications, Inc. Revenue Net Income (loss) Loss trend ’92 to ‘95 Net Loss = decrease of 57% Revenue growth overall = 130% Capital Exp’s = increase of 46%
  • 19.
  • 20. Recommendation and Rationale Service Launch 1 st Decision to make Does Rogers provide the service or not Required Capital A Profitability B Protection of existing customer base C Growth potential D
  • 21.
  • 22. Estimated 1 st Year Financials for Newmarket launch of WAVE 70% computer penetration foreseen by 2000 / Internet users doubled yearly Opportunities 160 (1% of 16,000) 800 (5% of 16,000) Recurrent Costs = $272,000 (independent of # of customers) Expected penetration: Mainstream: 5% at $30/month Niche: 1% at $50/month Conservative forecast: New users are likely to pay more than $30/month in the future
  • 23.
  • 24. Recommendation and Rationale Mainstream 2 nd Decision to make Target a niche or mainstream market Required Capital A Profitability B Protection of existing customer base C Growth potential D
  • 25. Recommendation and Rationale Evaluation of Alternatives based on Decision Criteria Status Quo Niche product Mainstream product Rating Scale 1 to 5 for each criterion (1 = poorest rating; 5 = best rating) 11 12 15 Sum of ratings (max 20) 1 2 3
  • 26. Recommendation and Rationale 1 2 Evaluation of Alternatives based on Decision Criteria Status Quo Niche product Mainstream product Rating Scale 1 to 5 for each criterion (1 = poorest rating; 5 = best rating) 11 12 15 Sum of ratings (max 20) 3
  • 27.
  • 28. Timeline JAN ‘96 JUL ‘96 JUL ‘97 JAN ‘99 Offer cable internet in Newmarket and a few selected locations across Ontario and BC Jan ’96 (launch) Upon success of launch in initial locations, use revenues (and secured future revenues) obtained to finance progressive launch in other selected locations Jul ’96 (6 mos.) Continue expansion to have a coverage spread across Ontario and BC Jul ’97 (18 mos.) To be prepared against launch of ADSL , cable internet should be accessible to most of Roger’s cable subscribers Jan ’99 (3 yrs)
  • 29.
  • 30. Control Responsible staffs Approaches Types of Control Purpose Plan Project Manager (coordinate financial, sales and technical managers) Pricing Strategy, Product offering Evaluate achievement of forecasts Profitability Financial Manager Financial analysis, Sales-to-expense ratios Examine the real time financial situation Efficiency Sales Manager Sales force, Advertising, Sales promotion Evaluate and improve impact of marketing expenditures Field Progress Technical Manager Installation, Customer service center Examine the progress of installations and service support Assign a project manager reporting to V.P. Marketing
  • 31.
  • 32. Conclusion Offer Cable Service and How Main Issue Analysis of Internal Competencies and Environmental Factors 1st Status Quo, Niche, or Mainstream 2nd Launch to Mainstream in Newmarket 3rd Progressive Growth in Ont and BC 4th Established as a Full Service Provider before Bell Finally
  • 33. Thank you for your Time! Any Questions?
  • 35.
  • 36.
  • 37. Advantages of cable access over other forms in the market Comparison of Data Transmission Rates Analog – 28.8 Kbps Digital – 128 Kbps 1.54 Mbps 500 Kbps Increasing Relative Access Rates Comparison of Installation/Modem Costs Decreasing Cost ($)
  • 38.
  • 39.