Ownership restrictions force AT&T into arms of enterprise customers

AT&T Canada hasn't given up its battle for deregulation, but it isn't letting foreign ownership rules get in the way of new business opportunities in Canada. In fact, its potential foothold into the enterprise market just got a lot bigger with a deal that makes AT&T Inc. a preferred SAP AG hosting partner for North America. The agreement has the potential to drive considerable business into AT&T's data centres, including the recently-completed facility in Toronto. "It's almost like wining an award," David Denault, GM for AT&T Global Services Canada, says of the three-year deal. "It says we have the application infrastructure and that we can bring the skills to the table." It is also part of an ongoing effort for AT&T to re-brand itself in Canada, away from the perception of being a consumer-driven telco to a full-service infrastructure provider. But the Canadian arm of AT&T has some challenges - one of the most important being current foreign ownership rules in Canada which prevent the US company from owning telecom infrastructure north of the 49th Parallel. The company is pushing for a change though, filing comments with the Competition Policy Review Panel (CPRP). In those comments, AT&T suggests that, at the minimum, current rules shouldn't apply to foreign-owned telcos with less than 10% share of the telecommunications market. AT&T's final goal is for no restrictions at all. Despite this obstacle, the company is billing itself as a global infrastructure provider that can deliver to large Canadian enterprise accounts. "We have 38 data centres around the world," says Denault. "We see them as one integrated offering for customers with over $200 million in revenue. We are focusing on the significant enterprise customers." Without pushing the message, AT&T is building the necessary capabilities should Canada eliminate restrictions of foreign direct investment in telecommunications. It would be hard for AT&T to start from scratch, and there would be limited opportunities for takeovers, or even partnerships. However, analysts do question the merit of the company's strategy in Canada. "I don't see why they would want to get back into this," says Mark Tauschek, senior research analyst with Info-Tech Research in London ON. "They walked away from a partial play in the consumer market because it wasn't profitable. If the CRTC said, ‘Go crazy, open your own company,' there are so many things they would have to do to start up a telco." Taking another kick at the Canadian can would also require the telco to offer a wireless component as well, according to Tauschek. "On the wireless side they'd need spectrum. It would be an enormous amount of work to get a roaming agreement on Rogers Communications Inc.'s GSM network, and what would be the return on their side?" he says. In a deregulated environment, one option would be to buy majority ownership in an existing carrier and pick up more spectrum at auction. It would be doable, and the money they are spending on legal arguments to open the market suggest that there is a plan on the back burner. For one thing, AT&T is the exclusive provider for the iPhone in the United States, yet will lose out when it comes to Canada. "They don't have much traction in Canada," says telecom consultant Michael Rozender. "Certainly not with their name and reputation on the consumer side, and certainly not since they went their separate ways with Allstream." But AT&T's public face in Canada is all on the enterprise front, while still continuing to press for deregulation. Denault meets monthly with a group of customers, and they aren't talking cheap long-distance. "We get input on skills, facilities and network requirements. We do this so that our investments reflect customer need. And this is what SAP recognized," he says.

Ownership restrictions force AT&T into arms of enterprise customers

News | February 21, 2008

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