I know we are talking about some really small towns (3700 TV subscribers, 150 internet subscribers in 13 communities), but something seems a little off when the phone company buys the cable company. That is what MTS Allstream announced yesterday in purchasing Valley Cable Vision.
Kelvin Shepherd is quoted:
This transaction advances our strategy of being Manitoba’s leading full service provider of wireline, wireless, broadband internet, and television services. We look forward to building on Valley Vision’s strong tradition of serving cable television customers in the Pembina Valley, and being able to offer an expanded suite of communications and entertainment service options that meet their needs.
In the Pembina Valley, MTS Allstream won’t just be the leading full service provider; they’ll be the only service provider in town.
It begs a couple questions. How does creation of a single monopoly provider help customers? How does operating a small cable company benefit shareholders of a national telco? I would like to hear the story behind acquisition.
I had a note from a reader who tells me that he has an interesting way to get his communications services.
He took advantage of a Rogers sign-up bonus to get 6 months of free phone service. However, he uses BitTorrent and he wasn’t crazy about the impact of ‘traffic shaping’ from Rogers, so he uses naked-DSL Sympatico for his high-speed internet – no local telephone service over the loop.
I understand that most of the strange combinations like this are put together by competitive analysts from one company checking out the deals and services from the other. This person is just a plain, ordinary consumer.
It is unusual, but it is evidence that some people will arbitrage deals and aren’t as concerned about bundles – unless there are tangible savings. Any others out there?
TELUS has announced its plan to reorganize itself, in its entirety, as an income trust.
There will be many who will analyse the valuations, the tax implications, the costs, etc. For now, I will note that TELUS has distinguished itself in that it isn’t reorganizing its operations, spinning out parts of the company, departments, geographies; the entire company will fall under this structure.
Their objective is clear – put shareholders in control of their tax planning. I have commented before that I don’t like energy expended on income trusts when the government could eliminate the advantages in its next budget. Bringing the entire company under the income trust structure may give TELUS the best of both worlds. Let Bob McFarlane’s finance folks work on optimal finance structures, while the rest of the company does what makes sense operationally.
Update:
Red faced award has to go to Morgan Stanley that issued a downgrade just last Friday, missing today’s run up of almost 15% (more than 15% at the peak). Ouch.
He pointed out that CBC raises the issue of Net Neutrality:
The business case analysis for Internet video is complicated by the fact that suppliers of broadband connections may also have incentives to control the bandwidth available for Internet video. Canadian cable companies engage in “bandwidth shaping” which allocates different levels of transmission capacity to different services according to the operational preferences of the cable company. This type of bandwidth shaping can ensure efficient use of transmission capacity. It can also ensure that Internet video by third parties does not become a threat to the business of the cable company, whether it be the delivery of traditional television programming to cable subscribers, VOD or the distribution of cable company-owned Internet video services.
[emphasis in original]
The CRTC has looked at this issue twice in relation to VoIP. In the original 2005 VoIP Decision in 2005, the CRTC said
The Commission considers that it can rely on subsection 27(2) of the Act, where appropriate, to prohibit a Canadian carrier from restricting its broadband customers from dealing with an alternative service provider of the customer’s choice. This issue can therefore be addressed by the Commission on a case-by-case basis, should it arise. Such competitive disputes are likely to be resolved by the Commission in a timely manner, using its expedited procedures.
[P. 475]
In light of the foregoing, the Commission concludes that it would not be appropriate to impose a general obligation on all broadband access providers to unbundle quality of service capabilities that these providers offer to their own customers at this time.
[P. 482]
In its recent reconsideration of the VoIP regulatory regime. the CRTC again declined to create specific Net Neutrality regulations, again citing S. 27(2) of the Telecom Act:
In Decision 2005-28, the Commission considered that it could rely on subsection 27(2) of the Act, where appropriate, to prohibit a Canadian carrier from restricting its broadband customers from dealing with an alternative service provider of the customer’s choice. The Commission also considered that any such issues could be addressed on a case-by-case basis using expedited procedures and denied parties’ requests for the imposition of an access condition.
[P. 132]
Accordingly, the Commission denies the requests of Vonage and Cybersurf to re-examine the need for an access condition at this time.
[P. 134]
In relation to voice service, twice the CRTC looked squarely at whether specific conditions needed to be imposed on facilities-based ISPs. Both times, the CRTC determined that there is already sufficient protection contained within the current regulatory framework.
What is Section 27(2)? It is the Unjust Discrimination provision of the Telecom Act:
No Canadian carrier shall, in relation to the provision of a telecommunications service or the charging of a rate for it, unjustly discriminate or give an undue or unreasonable preference toward any person, including itself, or subject any person to an undue or unreasonable disadvantage.
This provision has seen a lot of action through the years – there are special meanings that we can help you understand for every “un” word.
Will the CRTC reach the same conclusions as it did with VoIP in respect of neutrality provisions for broadcasting over the internet?
