Utelco consolidation continuing; Cogeco makes play for Windsor fibre assets

Consolidation in the telecommunications space is picking up speed as more municipalities unload non-core telecom network operations, providing their purchasers better access to the enterprise market. When Cogeco Cable Inc. announced its acquisition of MaXess Networx yesterday, it marked the third time in as many months that a city-owned utelco was taken over. Atria Networks reached an agreement to purchase Hamilton FibreWired in January and with Telecom Ottawa a month later. In both cases, the cities deemed the telecommunications assets non-core to operations and sought out buyers. MaXess had been on the market since a decision from Windsor city council in 2004 determined the broadband network assets were no longer crucial to ongoing business activities. Ottawa had previously received offers for its telecom operation, but only hung the ‘for sale' sign up in recent months. Cogeco says the acquisition of MaXess adds complementary services to its business solutions portfolio. Director of communications Marie Carrier insists the purchase had nothing to do with the consolidation taking place in the market, noting that the company acquires "businesses that add to value to our business." Steve McCartney, CEO at Atria, says that the acquisition of Telecom Ottawa was in part about expanding geographically and consolidating under a single operating entity, but also about being better able to serve customers. Atria was formed from the combination of FibreTech Telecommunications and Guelph FibreWired in September 2005, and then expanded its footprint by purchasing SCBN Telecommunications Inc. in Simcoe County in 2007 and more recently Hamilton FibreWired earlier this year. "We had known for sometime that we needed to consider extending geography because to a new service, the larger your market the more likelihood you're going to have a good business case for the new service," McCartney tells Network Letter. "So we knew that that moment was on the horizon as prices for Internet services have fallen a lot over the years and then the services that we were layering on it was just a lot easier to do as a larger ." Being able to offer the best possible quality of service is critical in the enterprise market as the smaller players have to compete against behemoths such as Telus Corp., Bell Canada and MTS Allstream Inc. "In the networking business, the more of the facilities that are your own, the higher service levels you can offer clients," McCartney explains, noting that security is another element that can be much more robust on your own network. While Telecom Ottawa and MaXess are the two latest utility telecoms to be consolidated the biggest in Ontario is still on the market. Toronto Hydro Telecom (THT), which some estimate could fetch $200 million, is the prized catch of them all because of its location in Canada's largest city and its ownership of the city's light standards. Iain Grant of the SeaBoard Group has suggested in the past that any number of players could be interested in taken over the utelco. He points to Bell Canada, Telus, Rogers Communications Inc. and even Cogeo as potential suitors. Atria could also be interested because the purchase of THT would complete the company's network in southern Ontario. But Grant also indicates that since Toronto put THT up for sale, it might now want to change its mind because a city-owned communications network could play an important role in how municipal services are delivered in the future. "Communications is going to be an increasing part of things like distribution to power when we start looking at load shedding to cut out the high power peak demands," he says, noting that 60% of energy spending by utilities is to meet peak demand. "If you could shave peak demand by 20% by shutting off a water heater for two hours, the social savings are immense," he adds.

Utelco consolidation continuing; Cogeco makes play for Windsor fibre assets

News | March 12, 2008

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