Without a doubt, corporate philanthropy is a darn good thing. The more companies give back to their communities, the better off we all are. In an “out of the box” speech today, BCE Inc. CEO Michael Sabia expounded on this theme and its importance to Canada's largest company. To send home the message, BCE will increase its community investment spending by 40% to $26 million by 2007 from $19 million this year.
If you do the math, however, this represents a whopping 0.13% of BCE's $19.1-billion of revenue in 2003.
The strange thing about Sabia's speech was it was delivered to the Economic Club of Toronto. I would have expected more of a corporate strategic pitch – something along the lines that IP will change everything in the telecom business. Instead, it came across as a political speech. If i was a conspiry theorist, I'd be thinking Sabia was angling for a new position with Paul Martin's Liberal government in Ottawa. After all, he's a seasoned civil servant who has enjoyed nice success in the private sector.
Another consideration is the restructuring done by Sabia at BCE over the past three years – i.e. getting rid of non-core businesses and redundant employees – has been relatively easy. What he faces going forward is much more challenging – growing the business. If Sabia wants to bail out of the corporate world as a hero, now might be a good time.

Nortel Networks did a wonderful job last putting the heads of ex-CEO Frank Dunn and ex-CFO Doug Beatty on a platter for the Securities and Exchange Commission. With Dunn and Beatty accused of cooking the books, the spotlight is being turned on Dunn's predecessor, John Roth, and what role he played in Nortel's accounting “troubles”. If the company was fiddling with its revenue recognition practices at the height of the telecom book in 1999 and 2000, one has to ask if Roth was aware of what was going down. May he did, maybe he didn't but you can be sure the SEC is going to try to find out.
For a detailed look at what the SEC could/may do, read today's story in the National Post.
One of the reasons Roth is seen as a target is the $135-million of stock options he exercised in 2000. It needs to be stressed Roth did nothing wrong other than exhibit excellent timing. But while most Canadians saw the value of their retirement savings plans shrink as Nortel shares crumbled, Roth has retired to his estate in Caledon, Ont.
Speaking of estates, why is that Nortel CEOs feel the need to live in places the rest of us can only dream about? Frank Dunn – in probably one of the worse PR decisions in corporate history – is building a 15K square foot monster home in suburban Toronto.

Telus got the PR troops out today in a big way to launch its consumer-oriented push to talk service called Instant Talk. The roll out caught some analysts by surprise because it was expected rival Bell Mobility would be first to market. Telus has enjoyed success with its MIKE push to talk service, which is aimed at business users – although it does not disclose subscriber numbers.
According to WinterGreen Research, the PTT market will soar to US$10.1 billion in 2008 from US$84-million in 2003, while the number of users will dlimb to 340 mllion from 2.3 million.
My first reaction is “how does this growth happen so quickly”. One would assume a major component of the forecast is that many wireless devices will be equiped with PTT capability in a few years. It got me thinking that high-end (mid-end?) wireless phones in a few years will be armed with Web browsers, lots of memory for music, e-mail clients and PTT capability.
For carriers, PTT is all about ARPU. The more they can squeeze from consumers with new value-added services, the happier they will be.

As the Internet telephony market expands, there appears to be divergent approaches to pricing.
In one camp, firms such as Vonage Holdings Corp., AT&T Corp., Yak Communications Inc., and Primus Telecommunications Canada Inc. are going after price-conscious consumers. In the other camp, cable companies such as Shaw Communications Inc. and Comcast Corp. want to sell Internet telephony at premium prices.
Calgary-based Shaw highlighted this pricing gap last week at its annual shareholders meeting when CEO Jim Shaw discussed plans for a $60-a-month residential service with four calling features and 1,000 minutes of long-distance.
Comcast, meanwhile, plans to sell telephony service for US$39.95 in a bundle with its broadband service, and US$54.95 as a standalone product. The Philadelphia-based company's plan will include unlimited local and domestic long-distance calls and features such as 16 hours of back-up power, video calling and unified messaging.
These prices compare with Vonage, which is selling residential service for US$14.99 to US$24.99 in the U.S., and $19.99 to $39.99 in Canada. Last week, Toronto-based Yak started to aggressively market two new services for $12.99 and $18.99 a month, while Comwave Telecom sells service starting at $14.99 a month.
The difference in pricing seems to be based on several factors. The cable companies, which have made large investments to upgrade their networks to digital technology, are marketing their service as feature-rich and reliable to lure customers away from telephone rivals.
Rather than rely on the Internet, cable companies will route calls over their private networks to ensure high-quality service. Most cable companies will also offer emergency 911 service, back-up power, and send out their own crews to connect new customers.
“It's not our desire to do this to hurt phone companies. … We want to build value in the phone,” Brian Roberts, Comcast's chief executive, said during a Citigroup Smith Barney conference in Phoenix last week.
But rivals such as Vonage, which is led by its PR-savvy CEO Jeff Citron, and Yak are using the Internet by piggy-backing on high-speed access their customers get from telephone carriers or cable firms.
While Vonage offers features such as 911, others such as Yak will not because they are going after do-it-yourself customers who want a no-frills, low-cost service to complement their primary telephone line service.
Another marketing theme used by up-and-coming Internet telephony players is cheap or free long-distance. AOL Canada is using this pitch as a major part of its advertising. It is questionable whether this tactic will attract consumers because long-distance prices are already fairly inexpensive. Customers of Bell Canada and Rogers Communications Inc., for example, can get 1,000 minutes of long-distance for $5 a month.
Shaw's strategy to offer a $60 service is difficult to grasp because analysts estimate the average Telus Corp. local telephony customer spends about $62 a month. How many Telus customers, therefore, will be willing to go through the aggravation of switching to Shaw just to save a few bucks a month?
“It mystifies me,” said Jon Arnold, a telecom analyst with Frost & Sullivan. “Is there that much demand? Is there that much Telus resentment out there? Maybe they are viewing it as standalone product that needs a return on investment on its own legs.”
Mr. Arnold said the fact Shaw operates its own network should let it offer a more competitively priced telephony service. And if Shaw does get aggressive about pricing, he believes Telus will counter-punch by making its bundles more attractive.
There are several reasons why Shaw may be talking about $60 a month — if, in fact, it has really revealed its marketing strategy. One issue may be controlling pent-up demand for an alternative service. The last thing Shaw needs is to be a victim to its own success.
By selling the service at $60, it can attract early-adopters and people who dislike Telus — a group analysts estimate to be 5% to 10% of the market. As the service gains momentum and Shaw hires more employees to provide customer service and technical support,the company can drop prices to gain market share.
Another theory is that Shaw will sell telephony at $60 as a standalone service, while offering it as part of a bundle with high-speed Internet and cable-television for $100 to $110. This would be similar to Halifax-based Eastlink Communications Inc., the seventh-largest cable company in Canada, which sells a triple-play bundle of television, high-speed Internet and telephony, for $105 a month.
Michael Sone, an analyst with NBI/Michael Sone Associates, said if Shaw is aiming to compete on features, it will be going head-to-head with Vonage, which has attracted more than 400,000 customers in North America with a feature-rich product. Shaw will also have to compete with Call-Net Enterprise Inc., which sells local service in several Western Canadian markets through its Sprint brand.
“Vonage has a lot of features and Sprint has a lot of features so I don't know what more Shaw can throw on there,” he said. “Quality-wise, I can't see [Shaw] making any kind of differentiation.”
Mark Evans

Cogeco Cable plans to “gradually launch digital telephony” this year. This approach is not a surprise given the company is only going to committ $5-million of capital expenditures to the business. Cogeco's ultra-cautious strategy stands in stark contrast with cable peers in Canada such as Shaw, Rogers and Videotron, which have aggressive telephony plans. Shaw will launch its service in Edmonton in a few weeks; Videotron is expected to jump into the market soon, while Rogers is targeting July 1.
Although Cogeco claims it will launch a telephony service in six months, It's hard to get a handle on how such a modest spending program will get the job done. Perhaps Cogeco wants to wait to see how other cable rivals fare before it takes the leap. Maybe it doesn't expect much competition from companies such as Vonage and Primus. Only Cogeco CEO Louis Audet knows – and he wasn't talking much about telephony today during a conference call.

Good news for the folks at AT&T's CallVantage as PC Magazine has awarded it top marks in a review of six VOIP service providers. That said, it is not the most overwhelming endorsement as the magazine says while CallVantage “isn't the best performer or the cheapest”, it “strikes the best balance overall, solid in every major category.” PC Mag also likes the fact AT&T will send a technician to do in-house installation.
All we need to see now from AT&T are subscriber numbers for CallVantage to see if the service is resonating with consumers. It's fine to have the top-rated service but if no one buys it, what does it matter? The only time CallVantage seems to jump into the spotlight is when it cuts prices to compete with Vonage.
Speaking of Vonage, it has apparently surpassed 400,000 customers. Let's do a little math to see what this means: 400K x $20 a month = $8M x 12 months = $96 million of annual revenue. So what do you think $96M of internet telephony revenue and strong subscriber growth are worth? 8×8 Inc. is worth $151 milliion and it had 26,000 customers as of Sept. 30, 2004. If the same valuation formula is applied to Vonage, the company is worth about $2.3 billion. Of course, no one has any idea of Vonage's bottom line. All CEO Jeff Citron will disclose is Vonage is making profits before marketing costs – and Vonage's marketing costs must be enormous.