Mark Evans

Internet access outside North America

In North America, it's easy to take Internet access for granted. We're almost at the point - particularly in Canada - where dial-up access is almost considered ancient technology. This reality came home to roost during a recent vacation to Playa del Carmen, a small resort city in Mexico (www.playadelcarmen.com) where Internet cafes are still very much alive and well. They are not only used by tourists checking their Yahoo or Hotmail accounts, but by locals looking for information online. It is a good reminder there are many people who do not have Internet access at home, and people who don't use the Internet at all - as hard as that is to believe for us Web addicts. This reminded me of a speech Nortel CEO Frank Dunn gave earlier this year. Most of it was pretty dull stuff. Some of the reporters - okay, me - rolled their eyes when Dunn started talking about buses that travel through remote parts of India providing people with wireless Web access. It struck as just another fun-fact that high-tech CEOs like to throw into speeches, but perhaps Dunn is onto something.

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Do-It-Yourself VOIP

All VOIP, all the time seems to be the mantra these days. What with Vonage raising another US$40 million, it's hard not to believe investors have got a bad case of VOIP fever. One of the biggest issues I have with consumer flavors of VOIP is that it's great if you're a young, tech-savvy person with a cable connection - but not so user-friendly for the rest of us with kids and multi-phone houses. Sure, VOIP service providers contend it's plug-and-play but that's just good marketing tactics. Until VOIP becomes easier to use, it will be a niche service. That said, there are some interesting technologies on the horizon. One of the more intriguing is from DataLogic, which has VOIP calling device technology that telephone makers can use to build VOIP/TDM phones, thereby eliminating the need for a VOIP adapter. There are also reports Intel is going to build VOIP capabilities into a computer chip. Expect a flurry of new, cool VOIP technology as the market gains momentum.

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VOIP regulation

Canada's telecommunications regulator appears to nearing a problematic fork in the road with the emergence of new VOIP services. CRTC chairman Charles Dalfen says the $10-billion local telephony industry will be regulated, regardless of the technology used to provide it. If this is the case, where does leave the CRTC's decision in 1999 to not regulate the Internet, which, in theory, could include VOIP? The CRTC could find itself with some difficult decisions to make if VOIP starts to catch on and finally provides viable competition to incumbent carriers such as Bell Canada and Telus. If, for example, the CRTC does not regulate VOIP, what happens if Vonage, AOL Canada and Primus build healthy market share? Clearly, Bell, Telus, et al would not be happy, and they would likely push the CRTC to do two things: regulate VOIP or deregulate traditional local services. Either way, the incumbent carriers want a level playing field. If Dalfen's recent comments are any indication, there will be some kind of regulation, although one suspects it will be minimal to keep incumbent carriers happy. Personally, regulators in Canada and the U.S. have a little bit of time before they are forced to act because VOIP is far from being a consumer-friendly service. For the time being, it will be a cool tool for young, techie guys. That said, the regulators need to create a framework for VOIP soon so everyone knows the landscape.

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BCE - Where's the Growth?

Sure, there's some good news from BCE's fourth-quarter results - it scooped up a huge bunch of wireless subs, the high-speed Internet access business is rolling, and CTV's doing well due to the strange fascination among couch potatoes with American Idol. What you can't ignore, however, is that BCE's core business - selling telephony services to big corporations - is struggling to generate top-line growth. Why? There's plenty of competition, the CRTC is no longer as BCE-friendly, and you have the emergence of Internet Protocol technology, which could lower prices as corporate clients aim to reduce their telecom spending. If you add it all up, BCE CEO Michael Sabia has to stay with his tried-and-true strategy of cutting costs (BCE prefers to call its “productivity gains”). This means cajoling employees to take voluntary retirements, getting out of non-core businesses, and walking away from low-margin contracts. The good news for BCE is that misery loves company. Allstream Inc., for example, is counting on a flurry of new IP services to reverse its revenue declines. Allstream's strategy, which sounds much like BCE's, is to control costs - including a eye-opening 10% capex-to-revenue ratio - and hope that large corporate customers get a bad case of IP fever. If you want a good reality television show with plenty of drama: set up a camera in the office of a telecom CEO.

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Bell Canada's Western Canada Waterloo

To no one's surprise, Manitoba Telecom exercised an option that forced Bell Canada to buy MTS's stake in Bell West for $650-million - give or take a few million bucks. MTS CEO Bill Fraser should give a large bonus and a pair of centre-ice tickets to the next Manitoba Moose hockey game to the person who managed to insert the “put option” in the deal that created Bell West in 2002. You can argue that Bell West has long-term potential to take market share from Telus Corp., but it is a big-time money loser right now. You can bet that Mr. Fraser will find good use for the money, which could see him hand it back to shareholders via a special dividend. Then, there's that income trust proposal a mysterious institutional investor is pursuing. Stay tuned for this exciting telecom story.

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TWU

What's the Telecommunication Workers Union afraid of? That's an interesting question given that it appears president Rod Hiebert is reluctant to speak with the national media. Despite repeated efforts to inteview him, Mr. Hiebert has declined entreaties by the Financial Post to discuss the union's bargain position against Telus Corp. It is difficult to not to think that Telus' unionized employees have less than a happy appetite to strike when push comes to shove despite a strong strike vote last week. We shall see.

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