Telus hopes GM deal will drive VoIP

Telus Corp. is hoping last month’s deal with General Motors of Canada Ltd., to host and manage the auto manufacturer’s IP-Centrex telecommunications, will lead to more large enterprises signing up to switch over to IP telephony.

The contract, reported by the Financial Post to be worth an estimated $11 million over five years, is regarded by some industry observers as a significant win for Burnaby, B.C.-based Telus over Bell Canada, the incumbent telecommunications service provider in Ontario and Quebec.

But the development is likely to prove much less influential or important than initially perceived, according to at least one analyst. Iain Grant, managing director of research and consulting firm the SeaBoard Group in Montreal, said, “It’s not nearly the seminal, landmark deal it’s made out to be.”

Issues ranging from the duration of contract, market regulation by the Canadian Radio-television and Telecommunications Commission (CRTC), tariffs and approvals each played a part in Telus winning the contract. General Motors refused comment and neither Bell nor Telus would discuss details.

Grant said the inroads being made by Telus into Ontario and Quebec made for a vigorous competitive environment, but added that “enormous change” was engulfing the telecomm market.

“The industry has never seen change so pervasive and on such a large scale,” said Grant. “[In the UK, British Telecommunication plc] BT is turning off its old network and converting every customer to IP by 2008.

“And Bell Canada has told its 1,000 top customers that they’re converting to IP telecomm by the end of 2006.”

Mohammed Nakhooda, a spokesman for Bell, confirmed that plans were being implemented to move its top customers to IP telecommunications, hopefully by the end of next year.

“It’s important that each customer make the transition at their own pace, one that makes sense to them in terms of both return on investment and business continuity,” said Nakhooda.

Manulife Financial Corp. signed a $140-million, seven-year deal for IP telephony, said Nakhooda, and Bell was connecting 1,100 Bank of Montreal branches via IP at a cost of $84 million over four years.

Michael Lank, director of IP-One for Telus, said similar plans by Telus would go against the company’s preferred strategy. “For us, that would be putting the technology ahead of the customer,” he said. “Some customers don’t want to change to IP, others will do so as and when they are ready, as and when their capital plans and business growth plans allow.”

Lank said all of Telus’s national customers were on the provider’s IP backbone. As part of a seven-year sub-contract from IBM worth $160 million, Telus provides TD Bank Financial Group with managed IP network services capable of carrying voice, data and video for over 1,200 TD Canada Trust branches across Canada.

Grant said the industry was experiencing a transitional phase, but “in three years’ time everyone will be wondering what the fuss was all about,” adding that the benefits of IP will have become so obviously clear.

“People are putting their toe in the water and seeing what IP can do for them. The IP-Centrex offering is an interim measure, until the company is ready for the full migration. Customers want to know they’re getting the maximum return on the equipment they’ve already invested in, before trying the next new technology.”

General Motors, for example, has opted for Telus IP-One Evolution, a Nortel-friendly proprietary product that merges IP and Centrex, rather than IP-One Innovation, which is Cisco-friendly and open-standard.

The Evolution option allows GM to change over to IP on a gradual basis — user by user, end-point by end-point — as and when the company is ready. In fact, GM’s telecom operates on Bell’s existing Centrex line. As the company converts to IP, communications will be routed along the Centrex line to a Telus central office for packeting into IP-based data.

Lank described the GM deal as “hugely important”, adding: “For us, this confirms our IP-One strategy is a good fit for the Canadian market.

“When someone like General Motors — a low-risk, formally structured company — makes the decision to go with hosted and managed IP telephony, it acts as a catalyst in the market — a bellwether, if you will — for other companies.

“Their decision says it’s a safe investment and that communicating over IP is here is to stay; it’s not a bubble.”

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