AT&T Canada endures shakeup

The past several weeks have produced good and bad news at AT&T Canada Inc. However, all of the company’s recent noise begs questions about its ability to succeed and serve customers well, according to industry observers.

First came the bad news: last month, the Canadian Radio-television Telecommunications Commission (CRTC) rejected AT&T Canada’s appeal of last June’s price cap ruling. The telco was seeking a 70 per cent reduction in what local carriers pay to the incumbents such as Telus Corp. for network access, but the CRTC gave a 10 per cent reduction in the price.

Naturally, we would have preferred that the government had granted an appeal, but our goal when we launched back in 2002 was to focus the government and regulator’s attention on the imbalance that we said is epidemic in the current regulatory framework,” said Chris Peirce, senior vice-president regulatory and government affairs for AT&T Canada in Ottawa.

The disappointing announcement was followed by relatively good news that the company had successfully completed its debt restructuring in early April.

The company said it now has approximately $139 million in cash on hand, a far sight better than its position less than six months ago when AT&T Canada had $4.5 billion of outstanding public debt.

At that time, the carrier sought court protection from hungry creditors and promised it was “business as usual” for customers, suppliers and employees.

Now healthy, AT&T Canada says nothing has changed. Customers can expect solid Frame Relay connections, helpful network design and consulting services.

“The restructured company will continue to offer the full suite of services that it offered before the restructuring began,” said Brock Robertson, senior vice-president, treasury and investor relations at AT&T Canada in Toronto.

He added that parent company AT&T Corp. will remain an important customer and supplier, even though the Canadian arm plans to sever ties with the U.S. firm. AT&T Canada generates approximately 20 per cent of its revenues directly or indirectly from AT&T Corp.

One AT&T Canada customer says it has been business as usual throughout the debt restructuring process. John Caines, Ottawa-based spokesperson for Canada Post, characterized the telco’s service as “very good.” He said Canada Post did not experience service disruptions.

“We are very happy with the way things are going [with AT&T Canada] and we don’t see any change in the future….There have been no issues with the service,” he said.

Still, a certain cloud of skepticism follows the carrier, according to industry analysts.

Lawrence Surtees, director, telecom research at IDC Canada Ltd. in Toronto, said the restructuring announcement isn’t so much big news as “public relations spin.” He pointed out that the vital steps required for restructuring – court and bondholder approvals – had already been made public.

He also noted that the telco would continue to focus on large- and medium-sized companies here in Canada. But given AT&T Canada’s recent troubles, success won’t come easily.

“Success is not going to be granted in the regulatory or political back rooms. It’s not going to magically come about with a new name and a clean financial slate. It’s a good advantage, but it doesn’t guarantee customer success,” Surtees said.

From a technological perspective, AT&T Canada has a sophisticated network, said Roberta Fox, president of Fox Group Consulting in Markham, Ont. She noted that the company has been silent about potential new services, although AT&T Canada continues to say it plans to work with its existing backbone, data capabilities and applications. Fox said this is an appropriate strategy: put revenue back into the company before moving forward with new offerings.

For enterprise customers, is AT&T Canada a good bet on service? Fox offered a mixed message.

“For particular products that it will offer from a technology perspective, it’s solid,” she said. “But it will need to build the reputation and fine-tune the organization to match the quality of the network. Our customers are saying that a strong carrier is the right technology supported by the right people with the right organization.”

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