Carrier moves offer pros, cons

Bell Canada buys 360networks Corp. Manitoba Telecom Services Inc. (MTS) acquires Allstream. Telus Corp. aims to take over Microcell Telecommunications Inc.

These are just a few of the acquisitions and partnerships among Canadian telecom service providers these days as they jockey for industry dominance. Industry observers say the results are a mixed bag for their enterprise customers.

First, the good news: “It’s a wonderful time to be a customer,” said Roberta Fox of Fox Group Consulting, a network advisory firm in Markham, Ont. “With all these things coming together customers should take the opportunity to get what they want.”

Fox suggested that corporations should scrutinize the contracts and service-level agreements they have with service providers. Now might be a good time to consider new technologies and perhaps ask for lower fees for legacy services.

“They have the buying power,” Fox said of corporations, adding that newly merged carriers “have a lot to prove. Why not use that?”

Here’s the bad news: Fox said legacy services might be dropped from the carriers’ portfolios, forcing enterprises into new services that they don’t necessarily want. She suggested companies should “hang tough” and avoid being bullied into buying products that don’t suit their needs.

Industry watchers say the good news outweighs the bad. Brownlee Thomas, a Montreal-based analyst covering Canadian telecom trends at Forrester Research Inc., said companies that use service providers like Allstream and Group Telecom (which is part of 360) might be able to breathe somewhat easier knowing that there’s a good chance those carriers will be stronger financially in the future. Allstream and 360 appear all the more stable now that MTS and Bell, respectively, have purchased the firms.

“If we have viable competition, it’s good for the market place,” Thomas said. As for threats, Thomas said, “Too much consolidation would be re-monopolization” for the telecom industry. Fewer independent carriers could spell higher prices.

Ronald Gruia of Frost & Sullivan in Toronto figures the MTS-Allstream deal could be particularly good for customers, as the partnership that these service providers have forged creates a strong competitor for Bell and Telus. “It’s going to put downward pressure on pricing,” he said.

Iain Grant of SeaBoard Group in Montreal notes that the carrier shake-up could lead enterprises to reconsider their own networks just as service providers reposition with newly acquired voice and data links. For instance, he said companies could take the time to research new phone systems from the likes of Mitel Networks Corp. and Siemens AG to bypass the public-switched telephone network (PSTN) in favour of IP connections between enterprise offices. He also said companies should expect to see carriers “crawl up the value chain” with services like local-area network security to impress their corporate clients.

The analysts seemed to agree that MTS and Allstream constitute a match made in telecom heaven. MTS wanted to grow and Allstream was looking for a financial partner. Their intersection means MTS customers in Manitoba might get an opportunity to try out Allstream’s IP-based services, while Allstream customers might feel safer knowing that their carrier has greater fiscal backing.

Regarding Bell’s 360 acquisition, Grant said the partnership gives Bell greater network reach. “They’re two or three years ahead on their corporate build plan without building a thing.” Gruia also said Bell wanted 360 “to augment their data capacity in the enemy’s territory,” Telus’s local serving area in Alberta and B.C.

Thomas said Bell’s 360 buy could have a positive effect on Call-Net Enterprises Inc., and its customers. Call-Net, which operates Sprint Canada, means to acquire 360 assets that Bell didn’t want, notably network access in the lucrative Ontario market. Call-Net might be more financially stable going forward with these assets.

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