Telco gives stranded businesses a lift on information highway

Despite news that the data services market is not all it’s cracked up to be, one firm is going ahead with its plan to provide high-speed connectivity near Toronto to facilitate such offerings.

Enersource Telecom has turned on the taps to let data flow fast through its fibre-optic network. A division of Enersource Corp., a hydro company in Mississauga, Ont., the new carrier will supply this city just west of Hogtown with zippy data connections.

“Businesses, government, the leisure and entertainment industries have an enormous appetite for high-bandwidth applications,” said Gunars Ceksters, president and CEO of Enersource Corp. He added that Enersource Telecom would satisfy the hunger for broadband in Mississauga.

So far, Enersource Telecom has won contracts to provide quick connectivity for the Peel District School Board, the Dufferin-Peel Catholic District School Board, the Royal Bank of Canada and other businesses.

Brad Randall, general manager of Enersource Telecom, said the carrier’s network spans 180 kilometres and reaches 90 per cent of Mississauga’s business population.

But the announcement made in June comes at a time when other carriers say the data services market is not so hot, notes Mark Quigley, an industry analyst with The Yankee Group Canada, headquartered in Ottawa.

“From Telus (Corp.) and Bell (Canada)…they’re saying that there is some softening on the data side of the equation.”

Proving that point, BCE Inc. president Michael Sabia said during a recent speech, “We are continuing to see a degree of softness in the business data market.”

Nonetheless, certain factors could spur Enersource to success, indicating that sometimes a contrarian viewpoint yields positive results.

For one thing, “sure, there may be some softening in terms of demand,” Quigley said, “but you’re not dealing with a start-up company. You’re dealing with a company that enjoys tremendous revenue generation from the power side.…They don’t have to be concerned about immediately generating profit.”

As well, it’s important to distinguish between soft data revenues and a hardening demand for broadband services, said Roberta Fox, president of Fox Group Consulting in Markham, Ont.

“People confuse data. Do they mean access? Do they mean applications? Do they mean firewalls and services? It depends on what part of the network you’re looking at. When people say data is not growing, they lump that all together. But access and transport is growing tremendously.”

Ceksters pointed out that due to poor results in the data services market, many telcos have quit expanding their networks, leaving companies in “second tier” towns like Mississauga without broadband connectivity.

“The other telecom providers are pulling back…and leaving a void,” Ceksters said. “We think we can fill it.”

So do the analysts. Consider how hydro companies like Enersource own towers and tunnels that, although built for hauling electricity, are just right for running fibre-optic wires.

“They have the infrastructure in place already,” Quigley said. “From that point of view, it makes perfect sense to try and leverage that for something, to get some kind of additional return on investment.”

No wonder so many hydro companies are turning into carriers lately. Aside from Enersource, Quigley said an affiliate of Hydro Ottawa, Telecom Ottawa, also made its debut last month.

“Sudbury Hydro was doing something similar,” he said. “London Hydro and Ontario Hydro have done a lot of this sort of stuff.”

The question is will users learn to accept hydro companies as data providers?

“It’ll depend on the customer,” Fox said, explaining that small and medium-sized enterprises (SMEs) prefer to work with well-known data providers. Fox figures SMEs would turn to more traditional carriers – telcos like Bell Canada – for their data service needs.

But she said the situation could improve for the utility firms. As hydro companies become better known as data providers, SMEs will sign up for service.

Quigley said hydro companies have another ace up their collective sleeve: strong branding and a good track record.

“Everybody knows who they are.…And the brand they have is recognized as providing typically high-quality service. That can be leveraged from the power-generation side of the business and provided to the telecom side. But it is going to take some education to extend that association from the power company to…telecom services.”

Ceksters said education comes easy to the business community, whose members generally follows the leader. “I think when they see how fast the Royal Bank is handling data transfers, we’ll have more people knocking on our door.”