Capital intensity

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As I mentioned Thursday, the CRTC released its annual monitoring report on the state of competition in Canadian telecom. One of the interesting sets of numbers to look at in the CRTC’s monitoring report is capital spending.

I like to look at capital intensity, defined as the amount of capital per dollar of revenue. It is interesting to see that the wireline industry is investing twice as much, per dollar of revenue, as the wireless industry.

In 2002 and 2003, wireless revenues were in line with the industry at large: roughly a quarter of total wireless revenues and their capital spending was roughly a quarter of total industry investment. But in 2004 and 2005, the wireline business spent almost 20 cents out of each dollar of revenue in capital, while the wireless industry dropped to a low of 10 cents.

There are some fundamentals at play in both sectors. It is interesting to see that the wireless sector is able to grow revenues with declining capital, while the wireline side must fight just to minimize revenue erosion and increase investment at the same time.

As a historical artifact, look at the statistical outlier in 2001 – the aberration of new entrant capital spending driven by ‘Field of Dreams’ business plans of the dot-com bubble.

Sunny skies, open highways

5-1-1
The CRTC has assigned the 5-1-1 access code for the provision of weather and traveller information services, on the condition that the services remain free of charge.

This was a delicate proceeding for the CRTC, in that the competing application was from the Canadian Association for Suicide Prevention for the number to be used for crisis intervention and suicide prevention services. At the end of the day, the CRTC was concerned about overlap and confusion between other N-1-1 codes.

The Commission considers that the services to which CASP proposed that the Commission assign the 5-1-1 code are already being provided or could be provided through 2-1-1 services.

There are a few conditions placed on the new phone code assignment. First, the CRTC is requiring that the service remains free of charge. Second, the Commission is requiring the 5-1-1 weather and travel service providers to track roll-out information, such as locations where the service is available, which service is available, and the number of calls. The Commission is also directing that these details be tracked separately for weather and traveller information. The intent is to ensure that there is broad usage of the code for the purposes set out in the application. Finally, the CRTC asked the service providers to track their public awareness campaigns.

The industry will have 6 months to implement the number change from the time a request is made. Watch for 5-1-1 to launch early in 2007.

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Free calling

In an article this week, CARTT is reporting that Rogers employees will get free calling to countries involved in Israel’s war against terror.

Rogers President and COO Nadir Mohamed wrote in a memo:

It’s almost impossible to miss the daily media coverage of the events in Lebanon and Israel, and I imagine that if you have family or friends in the area, you are paying even closer attention – searching for information about what’s going on in an ever changing situation.

Over the past couple weeks we have written about the outrageous long distance rates that Canada’s mobile wireless companies are extracting from their customers.

Maybe someone at Rogers has been reading this blog. Maybe Rogers will look at the stimulative effect on airtime by making overseas long distance more reasonably priced (or free). Maybe we’ll see some creative market research emerge from this generous and thoughtful employee benefit.

Just maybe.

Otherwise, for the rest of us, we’ll have to use alternative cellular long distance plans like Cell 100 from Telehop.

CRTC report card

The CRTC has issued its 6th annual monitoring report on the state of the Canadian telecom industry.

We’ll be writing more about the report over the coming days. The report should provide lots of material for us to review.

Here are some highlights from the report. Keep in mind, these are 2005 year end figures.

  • Telecommunications service revenues increased by 3.5%. The majority of the increase is attributable to high-speed Internet and wireless services
  • Competitors’ share of these revenues increased to 35%
  • 98.9% of Canadian households have wireline and/or wireless services
  • 51% of all households subscribed to high-speed Internet service in 2005. 54% of high-speed Internet subscribers use cable modem

Watch this space.

Allstream takes flight

MTS Allstream announced yesterday that it has been selected to implement an MPLS solution for WestJet airlines.

It is a significant win for Allstream. Not only does the MPLS network (replacing existing frame relay services) represent an endorsement from an existing customer, it is an upgrade in the scope of services. WestJet has engaged MTS Allstream to implement Intellitactics Security Manager for its enterprise wide network.

We have spoken of confidence building events over the past few weeks with various TELUS announcements. This win for Allstream was long overdue.

MTS Allstream releases its Q2 results today. There is a conference call scheduled at 4:30. Will Westjet be enough to instill confidence in employees and the investment markets?


Update:
Results are in. Pierre Blouin has delivered on expectations and the market’s reaction so far is reasonably steady. While cost reduction efforts are moving along, it seems to me that MTS Allstream needs to focus on new revenue opportunities.

The CRTC monitoring report indicates that overall industry revenues are up – thanks in large part to wireless and high speed internet services. We’ll watch to see if MTS Allstream can continue to drive new revenues, such as its success in selling enterprise security to WestJet, in order to stop the erosion from the top line.

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