I wrote about the sale of Telecom Ottawa in my article An ideal future communications infrastructure, how do we get there, and what is stopping us!. At the same time I wrote a letter to my city councillor and Ottawa’s Mayor Larry OBrien asking for details on the sale.
Attached below is my letter, and the reply we (my councilor, the mayor, and myself) received from Rosemarie T. Leclair, President and Chief Executive Officer of Hydro Ottawa Holding Inc. (Republished with permission). I will add my own commentary in future articles, but am curious what other people think about the response.
Dear Mayor Larry O’Brien and Councillor Clive Doucet,
As a constituent I would like to ask to be sent details on the sale of Telecom Ottawa to Atria Networks. I believe this is a short term decision that heads Ottawa in the wrong direction, but hold out for the possibility that the media reports got the details wrong.
Yesterday, in an article for IT World Canada’s BLOG, I offered what I consider to be an ideal future communications infrastructure, how do we get there, and what is stopping us.
http://blogs.itworldcanada.com/insights/2008/03/20/an-ideal-future-communications-infrastructure-how-do-we-get-there-and-what-is-stopping-us/
I offer this as a direction that Ottawa should be heading, allowing our communications infrastructure to mature as our electricity, transportation and other utilities and infrastructure has matured. We need to separate out “generation” (transit, hosting, etc in communications) from “distribution”, understanding that distribution is best handled by the public sector (municipalities) while the other services are best handled by a vibrant and competitive private sector. Due to natural monopoly problems with the “last mile” for distribution, only through public sector managing of the underlying utilities and infrastructure can the private sector be competitive.
Please send me details on the sale, and please read the above article. If the City is able to envision what a future communications infrastructure should look like, it is far more likely that good decisions will be made. It would be ideal if Ottawa were a leader in moving towards this mature infrastructure, rather than being a leader in moving backwards.
Thank you.
Russell McOrmond
[contact information removed]
Dear Mr. McOrmond:
Thank you for your recent e-mail regarding Telecom Ottawa, which was forwarded to me for a response by Mayor Larry O’Brien.
Details on the sale of Telecom Ottawa can be found in two press releases that have been issued, on February 25 and March 11 respectively. These are available at www.hydroottawaholding.com.
Your letter and your blog entry raise important and interesting questions about the future of information technology and communications infrastructure in Canada and beyond. Without commenting on the merit of the ‘ideal future communications infrastructure’ that you outline, I would point out that it involves a level of policy and regulatory change that goes beyond the ability of any one company, or indeed any one municipality, to implement. If I have understood it correctly, this proposal would require sweeping changes to federal legal and regulatory frameworks, and to the structure of the telecommunications industry itself.
The model you use for comparison purposes – public monopoly ownership of electricity transmission and distribution infrastructure, with competition among generators and retailers of electricity – works because only one electricity distributor can operate within any defined service territory. No one else is permitted to operate an electricity distribution grid, or to provide electricity distribution services to customers, and regulated rates are in place to ensure adequate revenues to maintain the infrastructure. This situation does not exist in the telecommunications sector, and Telecom Ottawa must operate on commercially viable terms within the sector as it currently exists.
Telecom Ottawa’s core strength is its backbone broadband fibre network. The company has seen success in recent years by focusing on its core competencies – providing broadband facilities to large users with high bandwidth requirements (large businesses, government departments, and the MUSH sector, for example), and providing the core fibre backbone for telecommunications and ISP (internet service provider) services provided by other companies as a “carriers’ carrier”.
Within the current telecommunications environment, providing “fibre to the door” for residential customers is not a viable business model for Telecom Ottawa. It would entail direct competition with the Tier 1 national telecommunications carriers – something that was never envisioned for Telecom Ottawa, and which it is not well positioned to do. The delivery of residential telecommunications services is both highly competitive and capital intensive, requires extensive and specialized human resource capacity, and involves significant risk due to continuously evolving technology and market and regulatory conditions.
In sum, while Telecom Ottawa was created in part with a public policy objective in mind – namely addressing gaps in Ottawa’s broadband infrastructure, particularly for the MUSH sector (Municipalities, Universities, Schools, Hospitals) – the public policy objectives you outline in your letter are not within Telecom Ottawa’s ability to implement.
Having successfully filled the broadband gap for Ottawa’s MUSH sector, we are confident that Ottawa’s businesses and public sector institutions will continue to receive excellent service from Telecom Ottawa after the sale to Atria Networks LP.
Once again, thank you for the opportunity to respond to your concerns.
Sincerely,
Rosemarie T. Leclair
President and Chief Executive Officer
Hydro Ottawa Holding Inc.
April 16 update: Today I picked up my signed copy of For Sale to the Highest Bidder: Telecom Policy in Canada. The first chapter I read was actually the last chapter: “Internet Infrastructure for All: Time for Canadian Municipalities to Step Up!”, given the title’s connection to this article. While I recommend people pick up this book, a version of this article is available online. The book as a whole puts the issues we are talking about in a much needed context, which is helpful for those of us suggesting a change in policy direction towards a more free market competitive environment.
I am actually embarrassed as a resident of Ottawa, previously known as silicon valley north, that Fredericton and Toronto get the honorable mention for their municipal telecommunications infrastructure projects while Ottawa is heading backwards.