Competition still in infancy with plenty of problems for incumbents and new entrants

The advent of competition in the telephony market has been a good idea but the implementation leaves much to be desired, representatives of ILECs and CLECs agreed at a conference in Toronto last week. The Celebrating 10 Years of Telecom Competition in Canada meeting, held June 11-12, heralded the release of Telecom Decision 92-12, which first opened up the long distance telephone market to new players. Competitive markets are desirable, David Watt, VP business economics for Rogers Communications Inc., told conference delegates. Ideally, they provide lower prices, consumer choice, improved service, and faster service innovation. All markets have been competitive, with the exception of local service. "Large city, urban core business markets are the best of a bad lot," he remarked. "The residential long distance market is the next least competitive segment measured by market share, which is quite shocking after 10 years." All players have registered large losses, Watt noted. While competition has been a boon for customers, it has seen the large destruction of capital, both in equity and debt. Another side effect has been the dislocation of thousands of employees. Bernard Courtois, executive counsel for Bell Canada, agreed with Watt. He noted that when the first competition decision came down in 1992, the telco responded by shedding 5,000 workers. Another ruling three years later resulted in 12,000 jobs being eliminated. While the market for competition will continue to grow, the number of players may have to shrink, according to one CLEC executive. Tal Bevan, president of business operations at GT Group Telecom Inc., predicted increased growth but said there is only room for four or five national competitors. "There has to be consolidation at the high end of the market," he offered, although he did concede that certain niche providers might be able to find a share. The vice-chair/CEO of one of the largest CLECs scoffed at that notion. John McLennan of AT&T Canada Corp. questioned the proposition that the number of telcos should decrease. "Nobody should predetermine that number," he asserted. "But when you’re down to two large incumbents and three very weak new entrants who have been fighting for 10 years to get credible, it speaks for itself." Courtois still around All panelists at the conference session entitled Competitive Markets agreed the market is changing. Courtois, who noted he is the only senior Bell executive still around from the original hearings a decade ago, said the wireline market is in decline, with wireless and data in ascendancy. But Watt produced figures showing the wireless market is far from healthy. Over a period of 17 years, Rogers has lost $1.5 billion and has never posted positive financial results. Bell Mobility, whose financials are no longer reported separately by its parent company, only had six years of positive results between 1985 and 1999. That translated into no return on equity for the giant incumbent. Rogers lost $500 million on its investment in Unitel, Watt noted, but made money on the sale of assets to MetroNet in the late 1990s.Courtois reminded delegates to the conference that the telecom sector is in crisis globally. His company had foresight that others lacked, he said. "Bell was weaned more quickly from LD and moved into other areas than U.S. carriers were," he opined. That was a change from the initial days when Bell was poorly positioned to face competition, he said. The company was originally opposed to opening up the market but learned to adapt.

Competition still in infancy with plenty of problems for incumbents and new entrants

News | June 18, 2002

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Competition still in infancy with plenty of problems for incumbents and new entrants

News | June 18, 2002

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