Last month, Sprint Canada Inc. became the latest telecommunications provider to enter the local-access market by launching residential and small- to medium-sized business local services in the Calgary area.
While Sprint’s entry into the recently deregulated local market gives telco customers one more alternative to their provincial Stentor members, enterprise customers shouldn’t expect 1999 to be a breakthrough year for local pricing, according to one Canadian analyst.
“I think the market’s going to be pretty slow off the bat,” said Jordan Worth, an analyst with IDC Canada Ltd. in Toronto. “Unless people are going to get some real cost savings, you’re not going to see the same clamouring for services you saw with long distance.”
Customers are unlikely to see big price drops as they did when the long-distance market was deregulated, Worth noted, because the economics of local access are much different than they were for long distance.
Before deregulation, long-distance prices had been made artificially high to subsidize local-access rates. So there was a lot of room for improvement when the long-distance market was deregulated. The same isn’t true for local rates, Worth said.
The main incentive for telco providers to get into the local market, and the main attraction for enterprise customers, is the ability for providers to bundle all of an enterprise’s telecommunications needs into one package.
“A company would only have one person to deal with, one provider to deal with and one bill to deal with,” Worth said. “By bundling these services together, you’re theoretically trying to gain economies of scale. If you’re going to give a telco provider all your business, you expect to see real savings. And local phone service is part of that.”
Other than Sprint’s service in Calgary and the former local-access monopoly-holding Stentor members, businesses can get local service from AT&T Canada Corp., which resells Centrex services, and from MetroNet Communications Inc., which operates in major downtown cores across the country. (Editor’s note: This report was filed prior to AT&T Canada announcing on March 4 its intention to acquire MetroNet in a $7 billion deal.)
Smaller competitive local exchange carriers (CLECs), such as GT Group Telecom Inc. in Vancouver, also offer services in certain markets.
Juri Koor, chairman, president and CEO of Sprint Canada’s parent company, Call-Net Enterprises Inc., said that because Sprint is using its own voice switches to offer local service, it will be able to include functionality other telcos don’t. The company isn’t offering any extra functionality yet in Calgary, but Koor noted that doesn’t mean it won’t offer new functions later this year when Sprint enters more local-access markets.
Koor said Sprint will launch services in Vancouver, Montreal and Toronto by the end of this year and within three years will offer local service in 25 major Canadian markets.
Sprint’s local service efforts in Calgary have concentrated so far on users with between three and 20 lines and only in certain areas of the city, Koor said. The company is proceeding slowly to ensure that everything it installs works properly.
“Once we feel comfortable we can stand the volume, we’ll crank it up pretty quickly,” Koor added.
Also last month, AT&T Canada filed notice of the company’s intention to become a CLEC. The company plans to offer local services over its own network in up to seven major urban markets by the end of 1999.
AT&T Canada spokesperson Eva Innes said the company is not giving out any details on the timetable for the roll-out of local service.