Category Archives: telecommunications

Allstream deal rejection a bone-headed move


Naguib Sawiris: just how much patience does he have left for Canada?

The International Telecommunications Union, the United Nations’ telecom agency, recently released its latest report on broadband internet access. Some of the organization’s conclusions are now doubly ironic given the Canadian government’s shock rejection this week of the sale of Manitoba Telecom’s Allstream division to Egyptian billionaire Naguib Sawiris, the same man who brought Wind Mobile to the country.

Much of the report focuses on how to improve broadband access in the developing world, but it also has poignant advice for advanced countries. Its top recommendation suggests the further liberalization of markets:

Based on panel regressions of broadband penetration for 165 countries for ten years between 2001-2011, competitive markets are associated with broadband penetration levels some 1.4% higher on average for fixed broadband and up to 26.5% higher for mobile broadband. Competition has been a key driver of higher levels of uptake and investment in communication networks and services in many countries.

In the Canadian context, the recommendation seems to be aimed squarely at the country’s lingering foreign ownership limitations. Despite the Conservative government finally liberalizing these rules to some extent last year by allowing foreign ownership of firms with less than 10 per cent of the market, larger companies and broadcasters are still off the table.

The limits are likely discouraging foreign concerns from entering Canada in two ways - firstly because they might want to simply buy a bigger business than build one from the ground up, or secondly, that acquiring a small player and then competing against huge converged telecom-broadcasters such as Bell and Rogers is simply too tough a mountain to climb because their competitors have access to assets, such as broadcast, that they do not. Those two reasons combined are likely why there will be no major foreign bidders in the upcoming wireless spectrum auction.

Completely removing the foreign ownership restrictions on both telecom and broadcast is a necessary move for the long term. The sort of meaningful competition espoused by the ITU simply won’t evolve without it.

That’s what makes Ottawa’s rejection of the Allstream sale over supposed security concerns all the more surprising. MTS has been trying to sell the division, which primarily provides telecom services to Canadian businesses and government clients, for some time now, with no luck. Enter Sawiris, the same man who is largely responsible for lowering cellphone rates in Canada over the past five years through his backing of Wind, which basically gave the Conservatives even a shred of proof that their otherwise scattershot telecom policies - if they can be called that - were working.

Sure, Sawiris did complain loudly a few years back that the government hadn’t done enough and that he regretted getting into Canada, but ultimately his money did the real talking - he was, after all, willing to fork over another half-billion dollars for Allstream. Is the government’s rejection now just sour grapes over those comments or is there substance to its claims of security concerns?

We may never know, but two things are certain - the government is doing an excellent job of scaring away potential foreign telecom investors, which is the opposite of what the ITU is suggesting, and one of those investors is likely Sawiris. By all accounts, he is (or was) interested in re-acquiring - and saving - Wind, probably with a plan to combine it with Allstream to in fact overcome some of the competitive size disadvantages both companies are individually facing. Can anyone blame him if he now changes his mind? And if he does, how far up the creek does that leave Wind and, by extension, the government’s desire to have another strong wireless competitor?

Unless the Conservatices have some secret ace up their sleeves - a promise from Verizon to ultimately buy Wind? - the rejection of the one man who has kept them out of the hole they’ve slowly been digging may go down as one of their dumbest mistakes yet.


Posted by on October 9, 2013 in telecommunications, wind


Income levels and the high price of telecom

cell-phone-billIf you haven’t seen it yet, the CRTC’s annual Communications Monitoring Report is out and it’s full of exciting reading. From the percentage of English-speaking citizens listening to podcasts to the relative revenue growth of radio stations, the report has all the bases covered and should be on every Canadian’s required reading list.

I’m being facetious, of course. The regulator’s annual findings are about as interesting to read for the average Canadian as the phone book itself (do they still print those?). Nevertheless, it is an important compendium of essential data that documents the state of the union, as far as telecommunications and broadcasting goes. It is required reading for industry wonks.

The one finding I thought was most interesting is the household expenditures on communications services, which includes TV, wireless, landline and internet, per income level. Read the rest of this entry »


Posted by on October 1, 2013 in crtc, telecommunications


Lessons from New Zealand on Crown telecom firms

Saskatchewan: land of wheat... and innovation?

Saskatchewan: land of wheat… and innovation?

I wasn’t being entirely serious last week when I suggested that a potential plan B for the Canadian government, in the event that Verizon opts not to expand its wireless operations north, might be to start its own Crown cellphone corporation. But lo and behold just two days later, the Communications, Energy and Paperworkers - which counts many telecom employees among its ranks - echoed the idea with the same suggestion. In light of that, it’s perhaps time to examine the thought a little more closely.

The most obvious comparison to be made is to SaskTel, a provincial Crown corporation in Saskatchewan. The company competes against the likes of Bell, Rogers, Telus and Shaw across a variety of service offerings, including wireless, internet, landline phone and television. Even though the company is a relative flea compared to its rivals, it does pretty well for itself.

In 2012, it posted a profit of $130 million, with a dividend of $84 million going back to the provincial government. SaskTel began its upgrades to LTE wireless the same year, pushing its capital expenditure intensity up to a relatively high 26 per cent. Residents, for their part, seem to like the company, as evidenced by the 1.4 million accounts in a province of only a million people and its good standing in J.D. Power customer satisfaction surveys. This is probably because SaskTel’s prices tend to be better than its bigger rivals. Read the rest of this entry »


What happens if Verizon doesn’t come?

Heritage Minister James "Macho Man" Moore. Ooh yeah, dig it!

Heritage Minister James “Macho Man” Moore. Ooh yeah, dig it!

If there was any remaining doubt about where the federal government was coming down in the wireless war currently raging in Canada, Industry Minister James Moore put the issue to rest Tuesday evening with a rather sternly worded post on his website.

Bell Canada board member Anthony Fell provoked the reaction by first penning an open letter published in the Financial Post, wherein he charged the government of reacting to “a political populist initiative to capitalize on a misinformed public view of Canada’s telecommunications industry” through its alleged efforts to spur Verizon into expanding into the country.

Moore was having none of it: “Unlike Mr. Fell, I do not believe the public is misinformed. I think Canadians know very well what is at stake and they know dishonest attempts to skew debates via misleading campaigns when they see them,” he wrote. “Equally, Canadian consumers know instinctively that more competition will serve their families well through better service and lower prices.”

In the world of professional wrestling - which this over-the-top fight has at times resembled - that would be known as a “finishing move.” Bam! Cue Moore’s music and hit the pyro. Read the rest of this entry »


Canadian wireless investment: nothing special

snowflakeCORRECTION: It looks like I goofed in my calculation of wireless capital intensity. I incorrectly divided wireless carriers’ revenue by how much they spend on capital investment, rather than the other way around. I feel terrible about the mistake, but it turns out it wasn’t so bad after all. After running the numbers correctly, my conclusion - and the headline above - stands nevertheless. Check out the correct figures after the original post, which begins here:

One of the chief talking points from Canada’s big wireless carriers in their war against the spectre that is Verizon has been investment, as in: check out how much Bell, Rogers and Telus are spending to supply their customers with some of the supposedly best services in the world.

Telus, specifically, has played that card, with chief executive Darren Entwistle talking about how the company has “invested” more than $100 billion in Canada since 2000, while the whole industry has contributed about $420 billion in that same time frame.

I’ve tackled those wildly inflated claims before - the $100 billion figure, for example, isn’t really “investment” so much as it includes the company’s regular costs of doing business. That would include everything from labour  to staplers and rubber bands. A small portion of it - less than a third - actually qualifies as proper network investment, otherwise known as capital expenditure, with an even smaller part going directly to wireless networks.

Given that, how does actual wireless network investment in Canada compare with the rest of the world? I sat down this past weekend and crunched the numbers from 71 of the biggest cellphone companies in the developed world, spanning 23 countries, and here’s what I found: despite the talking point, Canada’s wireless investment is in fact nothing special. It’s actually thoroughly mediocre. Read the rest of this entry »


Posted by on August 12, 2013 in bell, rogers, telecommunications, telus, verizon


Telcos should eat their own dogfood

Dinner TimeOne of my favourite technology columnists is fellow Canadian Clive Thompson, who writes regularly for Wired magazine among others. In his latest column (which doesn’t appear to be online yet, otherwise I’d link to it), he writes about how American politicians should be forced “to eat their own dogfood.”

It’s a phrase often used within software companies in reference to how employees must use their own products, because doing so lets them quickly discover ingrained problems.

The concept ties in with something I’ve been thinking about lately in regards to the telecommunications industry. A few weeks ago, I joked on Twitter about how the only people who were defending Canada’s high prices were individuals - executives, consultants, Bay Street analysts and the odd newspaper columnist - who fall into considerably higher tax brackets than the vast majority of service users. I called this crew the Wireless One Per Cent, although really, it applies to wired services too. Read the rest of this entry »


Posted by on August 7, 2013 in telecommunications


Telus bogeymen are getting crazier and crazier

I'm afraid of Americans. I'm afraid of the world...

I’m afraid of Americans. I’m afraid of the world…

The good folks at Telus are at it again, with another dose of fear-mongering of what the evil bogeyman known as Verizon might bring when and if it enters Canada. On the company’s policy blog, regulatory vice-president Ted Woodhead recycles some of those old yarns and adds a new one or two. You know what that means, pardners: gather round for another session of Reality Checking (season eight, episode 12).

Bogeyman #1: Verizon won’t be anyone’s white knight. It’ll only come into Canada and charge high prices, like it does in the United States. “If Verizon enters the Canadian market, it will still have analyst expectations to meet, investors to answer to, and brand value to protect. Its actions will be driven by profitability, revenue growth and return on investment – not becoming Canada’s national discount brand,” Woodhead writes.

Reality check: No matter what happens, Verizon’s network and therefore its service won’t be as good as the Big Three’s for many years to come. Will the company charge Canadians the same amount for crappier service, and would Canadians put up with that? That’s mind-boggingly illogical. Also, the incumbents believe federal government ministers are sweet talking Verizon into coming to Canada. If that is indeed happening, wouldn’t one of the first things out of those politicians’ mouths be: “We want lower prices?!?” If it isn’t, then what the hell are they doing down there? Read the rest of this entry »


Posted by on August 5, 2013 in telecommunications, telus, verizon


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