Is there a role for municipal telecom?

The death knell for municipal Wi-Fi began to toll late last summer, supposedly, when several high-profile American projects were dropped, largely for financial reasons. Toronto Hydro Telecom shrugged, and continued to deliver an effective and reasonably priced service in the downtown core, with a sustainable business model.

THT’s future is less certain now. The City ownership has asked for expressions of interest in its purchase, though it hasn’t officially hung out the “For Sale” sign or posted it on Craig’s List (serious offers only, please). The recent sale of Telecom Ottawa to Atria Networks for $63 million (see page 16 of this issue) raises the question: Is there a role for municipally owned utilities in the provision of network and telecom services?

Communications Infrastructure

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Telecom Ottawa’s explanation for the sale was that a) its core business is electricity and 2) that the Telecom business, while sound, has a higher risk profile than perhaps a municipality should carry in its portfolio.

Iain Grant of SeaBoard Group suggests that THT might be worth closer to $200 million, not just on the basis of Telecom Ottawa’s valuation, but because of the intrinsic value of the network. THT’s fibre infrastructure would be a keystone for many players, including Atria. We’re virtually assured another wireless carrier after this summer’s spectrum auction; as Grant points out in his astute (and occasionally very funny) paper The Race is On! Toronto Hydro Puts Toronto Hydro Telecom on the Block, THT’s lightpole rights would be valuable to an MTS Allstream, for example.

The question not being asked is: Should the City be selling THT at all? Leaving aside the political economics of government competing for a service the private sector’s willing to provide, it’s a going and growing concern taking in $40 million-plus a year, well-run in a hands-off fashion and a widely cited example of service provision excellence. Maybe $200 million is low-balling.