Discretion – the better part…

Bell

Three weeks ago, Bell, Aliant and SaskTel applied for forbearance for discretionary services (caller ID, voicemail, extra listings, etc.). According to the Application:

the nature of discretionary services is such that there are market forces, quite apart from competitive pressures, that discipline the pricing of these services by the Companies

Given that competitors are bundling features with their dial tone, it looks like the incumbents are after greater flexibility to retain their customers.

A letter from the CRTC today seems to indicate the Commission is considering whether to issue a public notice. Stay tuned.

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Breaking inertial orbit.

RogersRogers released its quarterly numbers and Bay Street appears to be overjoyed. The stock immediately rose 10%.

Lots will be written about the various parts of Rogers that contributed to these quarterly numbers. I want to point out a couple little numbers that may get missed – a sign of the times.

One way messaging – paging – is down 20% compared to second quarter of 2005 and down 25% when we look at the first half of the year. Strangely, revenues actually rose 15% quarter over quarter – which may be a revenue recognition issue.

Are one-way pagers an artifact of the days before downloadable ringtones? What is the substitute – PDAs or text messaging? Are customers staying with Rogers when they terminate their paging contract?

An important measure for service providers is their ability to upgrade users from legacy products and retain them on their own upgraded product line. Any time that a user makes a change, there is an opportunity for the competition to take advantage of the decision to make a new purchase.

Like Physics 101, we’ll be looking through the carriers’ numbers this week to study the changes in inertial energy.

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Reporting challenges

As we wrote yesterday, terminology in describing the industry participants is an imprecise art and it is complicated by mergers and acquisitions.

Allstream and Sprint Canada have vanished as independent national facilities based competitors and now are part of hybrid organizations. In Allstream’s case, as the national operations of MTS, it is now referenced by the CRTC as part of the ‘ILECs out-of-territory’ category. Sprint Canada, since its acquisition by Rogers, is presumably part of the ‘Cable BDU’ category.

These industry structural changes make it difficult to examine year-over-year shifts in the market. In the CRTC‘s monitoring report, the examination of the Business Internet access market (Table 4.4.6) may have been distorted by the M&A; activity.

M&A; also is a factor in looking at Table 3.1.1, Total telecommunications revenues by type of service provider. Revenues from ‘Other facilities-based’ carriers has declined from $3.4B in 2001 to less than $100M in 2005. The acquisitions by MTS and Rogers of Allstream and Sprint Canada respectively explain most of the shift.

As a result, much of the growth in ILEC out-of-territory revenue between 2003 and 2004 and in Cable BDU growth for 2005 over 2004 is actually due to M&A; activity, rather than organic customer acquisitions.

Chocolate

After leading with the Motorola Q for business users, Verizon has launched a new phone targeting the rest of the market: Chocolate by LG.

It’s a phone, a music player (with up to 2Gb of storage), photo and video camera and player, GPS navigator, Bluetooth stero headset.

The device sets a new standard for the non-business market – well beyond youth.

Verizon is selling the phone on a two year plan at $149, or $249 when you buy a 2Gb expansion card, leather case and car charger.

Will TELUS leverage its Verizon relationship to bring Chocolate to Canada?

Language

The English language allows people to say the same thing using different words. A challenge in diplomatic initiatives and newspaper reporting is selecting which words to use. Different words express similar ideas in different ways. Some of the subtleties are often lost on mere mortals.

The same holds for regulatory decisions and reports.

As a result, carriers have been able to find inspiration from the CRTC‘s latest telecom industry monitoring report – with all sides claiming that their position has been bolstered. As I read the report, I have some concerns that, in at least one case, the report uses terminology that includes a subtle, yet unfortunate bias.

For example, in describing the participants in the Internet service space, incumbent local exchange carriers are refered to as ‘incumbents’ rather than ILECs. The CRTC is familiar with the term ILEC; it refers to ‘ILECs, out-of-territory’ on the same chart.

By using a term like ‘Incumbents’ on a chart describing internet service, it implies that the phone companies were there first – the phone companies are the ones to beat. Yet, the telcos have always been playing catchup with high speed.

Let’s be honest here. If there is an ‘incumbent’ for internet service, the title should go to the cable companies.

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