Qwest comes north of the border

Qwest Communications International Inc. is entering the Canadian communications market with fibre purchased from Worldwide Fiber Inc. of Vancouver.

The Qwest fibre-optic network in Canada is now approximately 6923km long, part of an approximately 39,445km network across North America.

“As we activate the assets in the first quarter of next year, and as the regulatory and ownership criteria are worked out, we’ll begin to offer IP and hosting services to the Canadian marketplace,” said Lew Wilks, president of Internet and multimedia markets for Qwest in Denver.

The services – mainly Internet access, IP transport and Web hosting – will be offered first in the primary markets of Vancouver, Toronto and Montreal.

“We’ll extend the ASP (application service provider) services that we make available in our U.S. markets to our Canadian platforms… We think it’s one of the areas where the greatest growth potential exists in the next several years in the Canadian market,” Wilks said.

Qwest will deal with CRTC foreign ownership regulations either in joint ventures or partnerships with Canadian companies, Wilks explained, as well as setting up a Canadian base of operations. No details were available at press time as to the nature of such arrangements, but he said Qwest will be making several announcements in the next two quarters.

George Karidis, an analyst with the Yankee Group in Canada in Brockville, Ont. said Qwest is just another telecommunications company that can “get in line” with the rest of the competition in the major Canadian markets.

“This isn’t the first of the US carriers that don’t have Canadian partners to come in, but they won’t be the last either. I think you’ll see Level 3 right behind them. I think you’ll see WorldCom coming in on its own. I think you’ll probably see some of the European carriers getting in on the game as well, in the same three or four markets that everyone wants to target… Toronto, Vancouver, Calgary and Montreal,” said Karidis.

He said the attraction has little to do with Canada itself, but is instead born of a desire to service multinational corporations with end-to-end service. Since many of those corporations have an office in Canada, carriers will be fighting to secure those customers in this country as well as elsewhere in the world. For that reason, Karidis expects Qwest to target large companies almost exclusively.

“Their strength will be in leveraging existing relationships that need access to the Canadian market and being able to migrate traffic that already exists onto their own network,” he said.

This means an increase in pressure on the sales staff of Canadian telecommunications companies, Karidis predicted, along with pressure to drop prices.

“In order to keep your business you’ll have to lower price, because at the end of it all, there’s not a lot of differentiation between throughputs. It’s how are you selling it and what sort of guarantees do you offer?

“Losing one [big account] won’t kill [the Canadian telcos], but that’s a big loss in revenue, so what are you going to do to get that revenue back? When you lose a customer that size, you’re not losing $1,000 a month in long distance, you’re losing a million dollars per month in communications. That’s a pretty big impact, and it takes a lot of $20-a-month consumers to make that up,” Karidis said.