Telecom providers are overbuilding: Cogeco exec

Canadian telecommunications providers are overbuilding their networks fighting for customers and “missing the boat” on other opportunities, says one of its veterans.

“As an industry I believe we are competing with each other in areas we should be working together,” Tony Ciciretto, president of Cogeco Data Services told the Toronto Board of Trade on Monday.

“In fact we are competing so vigorously on infrastructure development that we are turning networks into a commodity,” he said where providers scramble for what he called “low-value work.”

Instead, he said, providers should work together on some common services and find areas where they can differentiate themselves.

“There is enormous value to an intelligent approach to collaboration in our industry on the infrastructure side,” he said. “It will free up valuable resources and enable us to compete like crazy to provide our customers with creating innovations that will help them generate real productivity gains.”

Without naming companies, he referred to carriers who shared in the building of a wireless network – presumably Eastern Canadian-based BCE Inc.’s Bell Canada and Western Canadian-based Telus Corp., who in 2009 split the cost of constructing an HSPA wireless network across the country.

He also pointed to his own company, whose network lies within Toronto and is partnering Manitoba’s MTS Allstream for an upcoming IP VPN service to start early next year.

Cogeco Data Services is a division of cable operator Cogeco Inc. that offers businesses data and telephony services. Although its network only runs within the city limits, through partnerships its able to offer services around the world, Ciciretto said.

Among those in the audience was telecommunications consultant Iain Grant, managing director of the SeaBoard Group, who said Ciciretto is on the right track. The Cogeco executive should have talked about government initiatives around the world that have forced incumbent telecom providers to sell wholesale access to their networks to competitors, he added.

One example is Openreach, a British Telecom division created in 2006 mandated by Ofcom, the country’s telecom regulator. Another is the open access national fibre optice broadband network recently completed in Australia.

This approach should at least be publicly debated, Grant said.

In an interview after his speech Ciciretto said he prefers the industry to “self-declare” an intent to work together rather than be regulated.

“Intelligent strategic collaboration” provides a direct route to higher value work, he argued in his address. It also means “making money,” he added.

Collaboration — either with competitors or with other industries — isn’t a new idea, he said, pointing to efforts by IBM,  consumer goods maker Proctor & Gamble and a fledgling agency in Britain called Open Alchemy for developing new products with suppliers.
In fact, Circiretto not only believes his own industry needs to engage in competitive partnerships, he said all businesses in the country need to urgently look at it for building a stronger economy.

“I’m generally concerned about Canada,” he explained. “The status quo is not sustainable option … If we don’t get it right Canada will continue along a path to irrelevance. That is the inevitable consequence of a poor track record of innovation and sinking productivity.

“If we are to be a force in the global economy we need to figure out how to become better innovators, and you’re not going to do that by over-investing and commoditizing our networks. We’re focusing our resources on the wrong thing. We will become better innovators by rationalizing our networks and investing resources where the greater value is – working closely with our customers to enable them to innovate.”

He also cautioned that the kind of collaboration he’s talking about may need changes in corporate salary structures to incent staffers.

Cogeco Data Services used to be the telecommunications division of municipally-owned Toronto Hydro. Cogeco bought it in 2008 for $200 million and Ciciretto was named president in 2009. He had been president of a private investment firm he founded in 2008 after being vice-president at the business solutions division of Rogers Communications Inc. He has also been vice-president of sales and operations at what was Bell Nexxia, the phone company’s enterprise solutions division