Telecom Update #524, April 7, 2006

************************************************************ TELECOM UPDATE ************************************************************ published weekly by Angus TeleManagement Group
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Number 524: April 7, 2006

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** CRTC Sets Local Deregulation Rules Aliant Forbearance Application Denied Winback Period Reduced Mixed Reaction to CRTC Decision ** Bell to Send Customer Calls to India ** Winback Rules Upheld ** Nearly 5% of Homes Use Cellphones Only ** Alcatel Agrees to Buy Lucent ** Genesys to Buy VoiceGenie ** Navigata Launches VoIP in Saskatchewan ** MTS Adds Alarm Service to Telecom Bundles ** Bell Says Videotron Impedes Customer Choice ** Nortel Broadens Restatement ** Telus Offers Small-Business Bundle ** ITU Telecom Show Returns to Geneva ** Cableco Buying British Virgin Mobile ** RIM Revenue Soars; Stock Slips ** Head of Network Group Leaves Cygnal ** CWTA Holding Wireless Conference ** Our Publishing Schedule


CRTC SETS LOCAL DEREGULATION RULES: CRTC Decision 2006-15 sets out the criteria that the Commission will use in ruling on applications to "forbear from regulating" incumbent phone companies' local telephone service. The criteria include:

** Residential and business services will be considered separate markets for purposes of forbearance applications.

** To be considered for forbearance, the incumbent must have lost 25% market share (based on wireline and VoIP phone numbers in service) within a Local Forbearance Region (LFR). The decision lists 86 LFRs (33 metropolitan areas and 53 less-urban economic regions) for which the CRTC will track market share figures.

** In addition, the incumbent must have met all of its competitor quality of service indicators for the previous six months, and must have wholesale ADSL tariffs in place for competitors. It must also show that "rivalrous behaviour" exists in the relevant market.

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ALIANT FORBEARANCE APPLICATION DENIED: The only specific forbearance application ruled on in Decision 2006-15 was from Aliant, first filed in 2004. The CRTC ruled that, though Aliant has lost 33% of the local residential market in the Halifax LFR, it does not have a wholesale ADSL tariff and has failed to meet almost half of its competitor QoS indicators in the most recent six months reported.

** The Commission says it will "expeditiously" consider a new application from Aliant when it has met all the forbearance criteria.

WINBACK PERIOD REDUCED: The forbearance decision reduces to three months (from 12) the period during which incumbent telcos are prohibited from directly contacting residential customers who have moved to a competitor's local service, in an attempt to win them back.

MIXED REACTION TO CRTC Decision: Two weeks ago, we reported that "Industry reaction to the Telecom Policy Review report ranged from enthusiastic to downright hostile." (See Telecom Update #522) The same is true of reaction to the CRTC's ruling on local service deregulation, but the roles are reversed: now Bell and Telus are angry and their competitors are pleased. Some responses:

** Chris Peirce, Chief Regulatory Officer, MTS Allstream: "The forbearance decision is a good one for the telecommunications industry and for business and residential customers in Canada.... The CRTC has recognized that fair competition also requires a transitional approach to wholesale deregulation."

** Robert Depatie, CEO, Videotron: "This decision will allow competition to take root in a harmonious manner, to the benefit of Canadian consumers ... Deregulation of local telephone service is inevitable, but it must be introduced once conditions conducive to sustainable competition exist."

** Yves Mayrand, VP, Cogeco Cable: "The CRTC's new criteria will provide consumers with the assurance that they will quickly benefit from the impact of competition."

** Dan McKeen, Co-CEO, EastLink: "EastLink believes the CRTC made a thoughtful attempt to balance the interests of all parties ... [but would have preferred a 30% threshold and larger geographic areas, so it] is concerned the guidelines ... will not maintain long-term sustainable competition."

** Bruce Robertson, Director, Vonage Canada: "With these new rules, Vonage Canada believes all companies, regardless of size, will have an equal opportunity to compete for Canadians' telephone business on a level playing field."

** Michael Janigan, General Counsel, Public Interest Advocacy Centre: "We are pleased that the Commission listened to our views on the consumer safeguards that are necessary in markets which have been deemed to be competitive."

** L'Union des consommateurs: "Disappointed by the decision ... not convinced that deregulation is in consumers' interest ... Fears that the 25% rule will lead to duopoly rather than true competition."

** Lawson Hunter, EVP, Bell Canada: "We are profoundly disappointed ... The Commission's ruling exacerbates the problems of a system that policy experts have already said is broken ... An appeal to the federal cabinet remains a very strong possibility."

** Heather Tulk, VP, Aliant: "Once again the CRTC has shown a stunning lack of concern for consumers and an inability to understand the reality of the market characteristics at play in the various regions of Canada ... Aliant fully intends to appeal this decision."

** Janet Yale, EVP, Telus: "Unlike the forward-looking framework recommended in the government's recent Telecom Policy Review report, this decision shows that the Commission is out of step with the telecommunications industry's current situation."

** Ian Russell, Chair, Coalition for Competitive Telecommunications: "This Decision continues the legacy of regulatory intervention in the telecommunications marketplace that we know is no longer needed or wanted by Canadian business."

BELL TO SEND CUSTOMER CALLS TO INDIA: By the third quarter of this year, Bell Canada will route 5% of its total incoming call volume to call centres in India. Bell Senior VP Ellen Malcolmson tells Telecom Update that the offshored calls will be taken from the 30% of calls to Bell that were previously outsourced to third-party call centres in Canada.

** The Canadian Telecommunications Employees' Association says its members fear that the volume of offshored calls will grow, further eroding job security and job opportunities in Canada.

WINBACK RULES UPHELD: Two CRTC decisions this week deal with the winback rules:

** In Decision 2006-17, the CRTC agrees with Quebecor that Bell Canada violated the winback rules when it sent "customer appreciation" cards to former customers, inviting them to call Bell and providing a phone number (see Telecom Update #497). Bell is ordered to stop the practice.

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** In Decision 2006-16, responding to a 2005 application by Bell Canada and SaskTel, the CRTC says the winback rules do restrict commercial free speech, but that the infringement is a reasonable limit consistent with Section 1 of the Charter of Rights and Freedoms.

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NEARLY 5% OF HOMES USE CELLPHONES ONLY: A cellphone is the only phone in 4.8% of Canadian households, more than double the number two years ago. Statistics Canada says B.C. has the most cellphone-only homes -- 7.1% -- while New Brunswick, with 2.4%, has the fewest.

** The percentage of homes with no phone at all dropped from 1.5% in 2004 to 1.2% in 2005, the first time that figure has fallen since 1998.

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ALCATEL AGREES TO BUY LUCENT: Alcatel and Lucent have agreed to combine in a "merger of equals" based on a US$13.4 billion stock swap. Alcatel shareholders will have a 60% stake, but the board will be split 50-50 and Lucent CEO Patricia Russo will head the merged company. (See Telecom Update #522)

** Alcatel and Lucent plan to lay off 10% of their combined staff; they have not said if Alcatel's 3,000 employees in Canada will be affected.

GENESYS TO BUY VOICEGENIE: Genesys, a subsidiary of Alcatel, is buying Toronto-based "voice portal" developer VoiceGenie for an undisclosed amount. VoiceGenie, which has 90 employees, is second to Genesys in market share for IVR systems worldwide: its Canadian customers include Scotiabank, Bell Canada, and Rogers Telecom.

NAVIGATA LAUNCHES VoIP IN SASKATCHEWAN: Navigata, a SaskTel subsidiary, now offers its WebCall VoIP service in Regina, Saskatoon, and Prince Albert. Basic service, including 1,000 minutes of off-net long distance, is $29.95/month.

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MTS ADDS ALARM SERVICE TO TELECOM BUNDLES: Manitoba Tel customers can now include services from AAA Alarm Systems in product bundles with MTS Wireless, MTS High Speed Internet, and MTS TV, and receive an additional $5/month discount.

BELL SAYS VIDEOTRON IMPEDES CUSTOMER CHOICE: Bell Canada has asked the CRTC to order Videotron to stop disconnecting customers' inside wire from Bell's network when activating cable telephony service, and to allow these customers to continue using Bell's high-speed Internet services.

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NORTEL BROADENS RESTATEMENT: Nortel Networks now says that the scope of the accounting restatement announced March 10 will be wider than expected. The amounts involved were not disclosed. (See Telecom Update #520)

TELUS OFFERS SMALL-BUSINESS BUNDLE: Telus has introduced Business One, a bundle of IP-based telecom, Internet, and IT services designed for small businesses. It is currently available only in Alberta and British Columbia.

ITU TELECOM SHOW RETURNS TO GENEVA: This year's Telecom World show will be held in December in Hong Kong, the first time that the once-every-three-years extravaganza has been held anywhere but Geneva. But it seems that the non-European venue was not well received by exhibitors and attendees: this week the International Telecommunications Union announced that Telecom World 2009 will be held in Geneva: Hong Kong didn't even submit a proposal.

CABLECO BUYING BRITISH VIRGIN MOBILE: A British cable company, NTL, has agreed to buy the British wing of Richard Branson's wireless holdings for 962 million pounds. Branson's Virgin Group also owns 50% of Virgin Mobile Canada.

RIM REVENUE SOARS; STOCK SLIPS: Research In Motion says subscriber additions are up 50% since settlement of the NTP suit. Revenue of US$561 million in the quarter ended March 4 was 39% higher than a year ago. A $162 million charge related to the NTP suit held profits to $18 million. RIM's results trailed forecasts, sparking a 6% drop in its share price.

HEAD OF NETWORK GROUP LEAVES CYGNAL: Todd Rutherford, President of Cygnal Technologies' Network Solutions Group, is leaving the company to "pursue other interests." His interim replacement is CEO Jos Wintermans.

CWTA HOLDING WIRELESS CONFERENCE: The Canadian Wireless Telecommunications Association will hold a two-day conference entitled "Work. Live. Play. The Infinite Potential of Wireless" in Toronto May

16-17. It is the CWTA's first multi-day conference since 2002.

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OUR PUBLISHING SCHEDULE: Next week's issue of Telecom Update will be published on Thursday, so that our team can enjoy the long weekend.



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