With the excitement surounding Bell’s acquisition of Aliant and the creation of a massive regional telecom income trust, I wonder if anyone at MTS is having second thoughts.

Almost exactly 2 years ago, on March 18 2004, John McLennan and Bill Fraser announced that income trusts make no sense in telecom and that was why MTS would abandon such a proposal in favour of the acquisition of Allstream. At the time, Bill Fraser said that acquiring Allstream gave shareholders all the benefits of an income trust.

Two years ago, Fraser went so far as saying it would be quite a stretch to find any executive in any telco in Canada to say that revenues and cash flows are predictable and stable enough to fit an income trust model. VoIP and competition coupled with regulatory uncertainty raised concerns of being capital constrained under an income trust structure.

At the time, Yellow Pages, Bell Nordiq and Amtelecom were the examples of Income Trusts that people pointed to In fairness to MTS, neither of the remote and rural operating companies had substantial sized cities like Winnipeg inside their operating territory to be direct comparables.

Still, a lot of MTS’ forecasted revenue increases and capital savings didn’t materialize and it is hard to see which shareholders actually received benefits. It sometimes seems that the main asset that Allstream brought was its $3B in tax losses.

At the time of the Allstream transaction, Fraser spoke of an income trust stock price of around $55 – the same as the reference price for Allstream deal. It just happens that $55 would be a dream for MTS today, which has been languishing closer to $40.

An income trust appears to be a more realistic option for regional carriers like MTS with the new plans for Aliant. Although Winnipeg is much larger than Halifax, the rest of Manitoba looks an awful lot like a flattened version of Atlantic Canada. And I’d take Winnipeg Goldeye over Nova lox any day of the week!

I wonder whether MTS is willing to take a fresh look at how to best unlock shareholder value in its asset base.

Is there anyone who would take Allstream off MTS’ hands to enable the rest of Manitoba to be gobbled up by the Bell Income Trust? If we see a relaxation of foreign ownership restrictions, Allstream could help a global player gain a national footprint at bargain prices.

With all of the attention on bigger news releases today (see Bell’s announcement on Aliant and Toronto Hydro’s WiFi plans), it might have been easy to miss an important filing by Vonage, complaining about Shaw’s VoIP tax.

This is an old issue that doesn’t seem to be going away. Joe Parent first raised the issue at The 2005 Canadian Telecom Summit on May 30, 2005. Today, Vonage filed a formal compaint with the CRTC, in part claiming that Shaw’s “quality of service enhancement fee” is:

part of a bigger issue of network neutrality and who controls how Canadians use their Internet service

So, the issue of Network Neutrality is now being moved to centre stage at the CRTC. It will be interesting to see if the Commission keeps the focus narrow or will it use this Vonage filing as the opportunity to launch a broader public process.

The issue of Network Neutrality was raised by some presentations to the Telecom Policy Review panel, but it merits a close examination on its own. This is an issue being examined broadly by regulators and politicians in Canada’s closest trading partners.

Thanks to Vonage, it is now time for the CRTC to hear from Canadians about who controls how they use their internet access services.

Cingular Wireless is one of the biggest assets that AT&T; is seeking to gain in its acquisition of Bell South. We can expect that this will result in the re-launch of the AT&T; Wireless brand in the US and permit an improved focus for Cingular.

It seems to me that the new AT&T; Wireless could be just what Industry Canada wants to shake-up the Canadian marketplace. It has been rumoured that Ottawa would like to see a fourth wireless carrier. Of course, if that is true, it makes you wonder why these folks approved Rogers’ acquisition of Microcell.

That aside, many have wondered who is breaking down the doors shouting for a liberalization of foreign ownership restrictions. Who would be willing to invest substantial dollars in Canadian telecom?

Well, it wouldn’t take an outrageous amount of money for AT&T; to shake up the Canadian wireless industry. Set up a bit of network in downtown Toronto, Montreal and Vancouver just to cut into the zillions of dollars being spent in roaming for American visitors and you can bet that the repercussions will be felt throughout the land.

Introduce a little bit of US style pricing and suddenly the comfortable oligopoly (as Industry Canada calls it) will start to operate a little differently.

I’d call it a Cingularly elegant way to shake things up a bit.

The news coming out of the New York business press this weekend is all about AT&T; hooking up with Bell South. It seems like only yesterday that the SBC / AT&T; deal closed – actually, it was November 18, 2005 – a little more than 3 months ago.

Remember back to January 1, 1984? That was the date that AT&T;’s divestiture took effect, creating 8 companies from the old Bell System: AT&T; PacTel; USWest; SBC; Bell South; Ameritech; NYNEX; and, Bell Atlantic. Divestiture was the made-in-America solution to foster a more competitive telecommunications landscape.

At the time, the idea was that the Regional Bell Operating Companies would lose their natural incentive to discriminate against new entrant long distance companies if they were divested from AT&T.; Divestiture was an experiment that was unmatched in the rest of the world. In many ways, global carriers were envious of the opportunities afforded to US players: access to the local infrastructure on an equal footing. Still, observers always felt re-entry into the long haul business was the long term objective of each of the Baby Bells.

It seemed like Bell South has been the proverbial bridesmaid to all of its siblings. On June 30, 2000, USWest was first to marry a non-sibling – when Qwest was looking for a ‘real’ business upon which to anchor its dot-com riches, it bought its way into respectability by acquiring one of the AT&T; offspring. The year 2005 brought together MCI and Verizon (the year 2000 merger of GTE and Bell Atlantic which had acquired NYNEX in 1997) and the mating of AT&T; and SBC by now having swallowed up its siblings PacTel (1997) and Ameritech (1999).

That leaves Bell South as the sole regional carrier without an integrated national or global network. Hence the attraction of an AT&T; courtship.

For more than 20 years, the US has given the world an experimental lab to monitor structural separation as a model for the development of competitive communications infrastructure.

The Bell breakup has been a catalyst for more than 20 years of telecommunications innovation and the impact has been felt around the world. Whether it was the technology investment roller coaster ride of the past decade; the globalization of supplier choice; every person on the planet has been impacted by the breaking up of the integrated Bell System.

With the enabling democratization of IP networks, as far as customers are concerned, the network is defined by access. Customers will choose between wireline and wireless, whether or not mobility is required. Competitive choice of access will be provided by cellular providers, cable companies, traditional phone companies and the emerging force of community sponsored networks.

However, customers may not necessarily buy their services from a facilities-based carrier. Just as we have seen for the history of competition, resellers have become a legitimate competitive option for consumers – residential and enterprise alike. The terminology is now Systems Integrators and MVNOs: Mobile Virtual Network Operators, but the concept remains the same: resellers that provide customers with creative packaging, greater responsiveness, flexibility and increased choice. With consolidation among the traditional carriers, such reseller options serve to discipline dominant carrier abuses.

For more on this subject, please see our papers: From Intelligent to Irrelevant Networks and Guerilla versus Gorilla Telecom or be certain to attend the Professional Services panel at The 2006 Canadian Telecom Summit.