Telecom Update #560, December 21, 2006

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published weekly by Angus TeleManagement Group

560: December 21, 2006

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IN THIS ISSUE:

** We're Taking a Holiday ** Cabinet Tells CRTC to Rely on Market Forces Order Ignores Industry Committee Majority ** Telesat Sold to Loral, Pension Fund ** Ericsson Buys Edge-Router Maker ** CRTC Okays Withdrawal of Phone Service ** Police Raid Phone Fraud Boiler Rooms ** Consumers Appeal Deferral Account Ruling ** RIM Still Mired in Options Review ** Primus Expands Partner Program ** SaskTel Cuts LD Package Rates ** Gatineau Free-Calling Area to Expand in June ** CRTC Suspends Local Competition Proceedings ** Rogers Provides Wireless Call Restriction ** Siemens Sets Optical Speed Record ** Phonetime Takes Call Select Private ** Telus to Buy Back 7% of Shares ** Nortel Inks $2 Billion Deal With Verizon

WE'RE TAKING A HOLIDAY: Telecom Update is taking a winter break; our next issue will be published Friday, January 5. We wish all readers a joyous holiday season and a successful and rewarding New Year.

CABINET TELLS CRTC TO RELY ON MARKET FORCES: The federal Cabinet has issued the policy direction to the CRTC that was first tabled in Parliament last June by Industry Minister Bernier (see Telecom Update #534), requiring the Commission to "rely on market forces to the maximum extent feasible."

** Cabinet made one change to the order, a concession to telecom competitors. In the CRTC's review of essential and wholesale services (see Telecom Update #554), the Commission is to take into account "technological and competitive neutrality, the potential for incumbents to exercise market power ... and the impediments faced by new and existing carriers seeking to develop competing network facilities."

ORDER IGNORES INDUSTRY COMMITTEE MAJORITY: On October 31, Parliament's standing committee on Industry, Science and Technology, after hearing submissions from telcos, cablecos, and other competitors, recommended to Parliament that the policy direction to the CRTC not be issued until the Committee had a chance to review the matter in more detail. The four Conservative Party members on the committee dissented.

** The preamble to the Policy Direction mentions the committee's recommendation, but notes that the vote "was not unanimous" and says "the Government has decided to move forward with issuing the Policy Direction at this time."

TELESAT SOLD TO LORAL, PENSION FUND: BCE has sold Telesat Canada for $3.42 billion to a new company formed by PSP Investments, which manages Canada's public service pension fund, and New York-based Loral Space and Communications. Loral will have a 64% ownership and 33% voting stake. Loral is contributing its own satellite business to the new company, making Telesat the world's fourth-largest satellite operator.

** The new Telesat will be headquartered in Ottawa and will conduct all its research in Canada. Daniel Goldberg, recently named Telesat CEO, remains in that post. (See Telecom Update #546)

ERICSSON BUYS EDGE-ROUTER MAKER: Ericsson has agreed to buy California-based Redback Networks for US$25 a share, a total of about $1.9 billion. Redback designs and manufactures IP equipment for carriers, including a line of multi-service edge routers that support broadband, telephone, TV, and mobility services.

CRTC OKAYS WITHDRAWAL OF PHONE SERVICE: CRTC Telecom Order 2006-342 approves an application by Northwestel to stop providing telephone service to Nanisivik, Nunavut. The telco said that demolition activity associated with the shutdown of the Nanisivik mine and the nearby community has repeatedly disrupted service, making it expensive and dangerous to maintain service to the remaining nine customers in the town.

** 23 residents of Nanisivik submitted a petition to the CRTC saying that Northwestel's action would cut them off from the outside world.

** Three commissioners dissented, saying that the ruling sets a precedent by exempting an incumbent telco from its obligation to provide service.

POLICE RAID PHONE FRAUD BOILER ROOMS: Police and RCMP say they have broken up a telemarketing fraud ring in Montreal, following a series of raids on December 19. The organization, which allegedly targeted seniors, is said to have grossed between $8 million and $13 million a year since 2003.

** Also this week, Simon Grouin of Centre d'expedition direct pleaded guilty to telemarketing fraud charges related to the sale of supplies for banking machines. He was fined $75,000; he and the company were placed under a 10-year prohibition order under the Competition Act.

CONSUMERS APPEAL DEFERRAL ACCOUNT RULING: The Consumers Association of Canada and the National Anti-Poverty Organization have now filed their appeal to the Federal Court, asking it to rule that all of the money in the telcos' deferral accounts should be returned to customers, not spent on broadband deployment or improving telephone service to the disabled, as ordered in CRTC Telecom Decision 2006-9. (See Telecom Update #548)

RIM STILL MIRED IN OPTIONS REVIEW: Research In Motion says its review of stock option grants is taking longer than expected and will involve a charge significantly higher than the previous estimate of $25 million to $45 million. RIM says it will file restated results by March 3. (See Telecom Update #554)

PRIMUS EXPANDS PARTNER PROGRAM: Primus Telecom Canada is offering "enhanced solution sets" to its resellers, including managed Internet access, Web development, website hosting, and server colocation.

SASKTEL CUTS LD PACKAGE RATES: Users of some SaskTel long distance calling plans will pay lower rates effective January 25. The Anytime North America plan will drop from $35 to $28 a month, and the Evenings and Weekends Canada plan goes from $25 to $23. Both rates will be lower for customers with several SaskTel services.

** Rates for the Business One Rate and Managed LD Solutions plans will also be reduced -- actual rates will depend on the customer's total usage.

GATINEAU FREE-CALLING AREA TO EXPAND IN JUNE: CRTC Telecom Order

2006-348 gives interim approval to Bell Canada's application to eliminate long-distance charges within the amalgamated City of Gatineau, Quebec. The change, to be effective June 18, will be financed by three-year bill surcharges of 20 cents (residential lines) and 18 cents (business lines).

CRTC SUSPENDS LOCAL COMPETITION PROCEEDINGS: In light of Cabinet's proposed revision of the rules for local phone deregulation, which would eliminate the CRTC's 25% market share loss test, modify competitor Quality of Service requirements, and eliminate winback restrictions (see Telecom Update #559), the Commission has suspended its own reconsideration of these matters until the Cabinet order is finalized.

ROGERS PROVIDES WIRELESS CALL RESTRICTION: Rogers' new Call Manager plan enables parents to set usage rules restricting the times, dates, area codes, and phone numbers available for calling on their children's cellphones.

** Aliant introduced a similar plan last month. (See Telecom Update #557)

SIEMENS SETS OPTICAL SPEED RECORD: Siemens says it has achieved data rates of 107 gigabits per second over a single channel in a 100 mile long fibre-optic route in the U.S. -- about two-and-a-half times faster than previous transmission performance. That's equivalent to sending two fully loaded DVDs every second.

PHONETIME TAKES CALL SELECT PRIVATE: Mississauga-based Phonetime International has acquired the 20% of Vancouver-based Call Select it did not already own. Phonetime is a wholesaler of prepaid phone cards. Call Select, founded two years ago, takes in $900,000 a month selling 1+ long distance services to ethnic communities.

TELUS TO BUY BACK 7% OF SHARES: Telus plans to buy back up to 12 million common shares (6.7%) and 12 million non-voting shares (7.5%) over the next 12 months.

NORTEL INKS $2 BILLION DEAL WITH VERIZON: Nortel has won a contract to provide up to US$2 billion worth of broadband wireless to Verizon Wireless over five years.

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