Telecom Update #554, November 10, 2006

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published weekly by Angus TeleManagement Group

Number 554: November 10, 2006

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IN THIS ISSUE:

** Entwistle: No Conversion Without Exemption ** TWU President Reinstated by CLC ** Newfoundland to Fund Fibre Link ** CRTC to Review Essential & Wholesale Services ** Competition Bureau Proposes Telecom Approach ** Videotron Bundles Cable Phones and Wireless ** Dell to Double Ottawa Call Centre ** OSC Investigates RIM Stock Options ** MTS Doubles the Speed of Light ** Most Telecom Providers to Pay CRTC Fees ** Winback Prohibition Remains at Three Months ** Europeans Want Roaming Fees Controlled ** Nortel Ethics Officer Resigns ** 68% Think Bundles Favour Suppliers ** MTS Revenue Down 6% ** Videotron Sales, Operating Income Soar ** Nortel Sales Up 17%, Loss Reduced ** Cisco Profit Up 25%

ENTWISTLE -- NO CONVERSION WITHOUT EXEMPTION: Telus President/CEO Darren Entwistle told reporters this week that the company will not proceed with plans to become an income trust unless Ottawa gives it the same exemption from taxes that has been promised for existing trusts. Finance Minister Jim Flaherty has said repeatedly that the exemption applies only to trusts that were already trading on October

31, which excludes Telus. (See Telecom Update #553)

TWU PRESIDENT REINSTATED BY CLC: An ombudsperson appointed by the Canadian Labour Congress has ruled that the Telecommunications Workers Union violated its own constitution when it removed President Bruce Bell from office in August (see Telecom Update #541). His ruling instructs the TWU to reinstate Bell and pay his back salary.

NEWFOUNDLAND TO FUND FIBRE LINK: The Newfoundland and Labrador government has agreed to pay $15 million to help fund a new fibre optic link to Nova Scotia, planned by Rogers Communications, Allstream, and Persona Communications. Total cost of the project is estimated at $82 million. (See Telecom Update #552)

CRTC TO REVIEW ESSENTIAL & WHOLESALE SERVICES: CRTC Telecom Public Notice 2006-14 opens a proceeding to consider redefining "essential services," and to review the classifications and pricing principles for all wholesale services provided by telcos, cablecos, and CLECs to each other. To participate, notify the Commission by January 2, 2007.

** The proceeding will include an oral hearing in October, 2007.

COMPETITION BUREAU PROPOSES TELECOM APPROACH: The Competition Bureau has outlined the approach it proposes to use in reviewing complaints of anti-competitive behaviour in deregulated telecommunications markets. The Bureau invites comments on its draft bulletin by December 29, 2006.

VIDEOTRON BUNDLES CABLE PHONES AND WIRELESS: Videotron's new Duophone package provides cable telephone service and wireless service including 300 anytime minutes, for $49.95/month. The package includes unlimited local calls to other users of Videotron wireless service, and unlimited LD in Quebec between users of Videotron cable phone service.

DELL TO DOUBLE OTTAWA CALL CENTRE: Dell Inc. says that over the next few years it will "nearly double" the size of its Ottawa Customer Contact Centre, which supports customers in the U.S. and Canada. The Centre currently employs about 1,200 people; a new three-story facility is scheduled for completion in September 2007.

OSC INVESTIGATES RIM STOCK OPTIONS: The Ontario Securities Commission says it is reviewing Research In Motion's practice of awarding stock options. The investigation is separate from a previously announced internal review by RIM. (See Telecom Update #548)

** 66 RIM executives and employees are currently banned from trading the company's stock, because the company has not yet filed its most recent quarterly results.

MTS DOUBLES THE SPEED OF LIGHT: Einstein said it wasn't possible, but ... Manitoba Tel has doubled the download speed for its $26.95/month High Speed Internet Light service to 256 Kbps. All existing customers are being upgraded.

MOST TELECOM PROVIDERS TO PAY CRTC FEES: The CRTC believes that its operating costs should be paid by all telecommunications service providers with more than $10 million in Canadian telecom revenues, not only by carriers that file tariffs, as is now the case. The change will require Treasury Board approval and must be published in the Canada Gazette for public comment.

WINBACK PROHIBITION REMAINS AT THREE MONTHS: CRTC Telecom Decision

2006-72 denies Primus's application to require incumbent telcos to wait 12 months before attempting to win back local phone customers from competitors, rather than three months as set in April 2006. (See Telecom Update #533)

EUROPEANS WANT ROAMING FEES CONTROLLED: A survey conducted for the European Commission finds that high roaming charges are the main reason why most Europeans limit their use of mobile phones when traveling outside of their home countries. 70% of respondents want the European Union to implement regulations to ensure "that prices for making and receiving calls on mobile phones when traveling in other EU countries are not a lot higher than those at home."

** The EC's website says that it costs carriers less than 20 cents/minute to support roaming, but consumers are charged an average of 1.15 euros/minute, and up to 3.5 euros/minute in some cases.

NORTEL ETHICS OFFICER RESIGNS: Nortel Chief Ethics and Compliance Officer Susan Shepard, appointed in January 2005, has resigned to "pursue other interests." (See Telecom Update #464)

68% THINK BUNDLES FAVOUR SUPPLIERS: According to a survey conducted by Decima Research on behalf of Vonage Canada, 68% of Canadians believe that bundled service packages combining Internet, home phone, mobile, and TV benefit the service providers more than consumers. 66% said that bundles force them to pay for services they don't want or need.

MTS REVENUE DOWN 6%: MTS Allstream reports third quarter revenue of $477.9 million, 5.9% less than a year ago. EBITDA edged up 1.1%; net income dropped 10% to $40.5 million. Enterprise sales were unchanged from the previous quarter. Revenue from local service declined 9.4%; from long distance, 15.9%.

VIDEOTRON SALES, OPERATING INCOME SOAR: Quebecor says that its cable operations brought in third quarter revenue of $331 million, 22.6% more than last year. Operating income rose 30.4%. Videotron added

60,900 phone lines, about the same as in each of the four previous quarters, to reach a total of 344,000.

NORTEL SALES UP 17%, LOSS REDUCED: Nortel Networks reports third quarter revenue of US$2.96 billion, 17.5% higher than a year ago. Enterprise sales rose 14% to $609 million. Gross margin of 38% was down from 39% a year ago. The net loss was reduced to $99 million from $136 million. CEO Mike Zafirovski said the company "should and will be moving faster" to achieve "profitability improvements."

CISCO PROFIT UP 25%: Cisco Systems reports net sales of US$8.2 billion for the quarter ended October 28, a 24.9% increase from the same period last year. Scientific Atlanta, which Cisco acquired this year, accounted for a third of the gain. Net income rose 27.5% to $1.6 billion.

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