Recently, four Network Managers from Ontario IOCs came together to discuss the collective challenges they face in an increasingly competitive telecom environment in Canada. The four sat face-to-face and answered some pointed questions I posed from an industry observer. Below is a short excerpt of our conversation.

The four senior executives who agreed to join me during this roundtable discussion are from four of Ontario’s leading service providers:

Dave Tofts, Manager of Network Operations, Amtelecom
Amtelecom is a full service telecommunications company providing local and long distance telephone, cable television, high-speed and dial-up Internet and business data services to over 40,000 customers in southwestern and central Ontario. The successor to a small independent telephone company that commenced operations in Aylmer, Ontario, in 1902, Amtelecom today is Canada’s third largest independent telephone company. Amtelecom is wholly owned by Bragg Communications Inc.

Rick Hill, Network Manager, Wightman Telephone
Wightman Telecom is one of Ontario’s leading independent telephone companies. The company offers local and long distance telephone service, high-speed Internet, cable television services, and security solutions. Wightman was founded in 1908 and serves the telecommunications needs of western Ontario.

Tim DeWeerd, General Manager, Quadro Communications Cooperative
Quadro Communications Cooperative provides local and long distance, high-speed Internet, and related services to customers in central Ontario.

John Downs, General Manager, Nexicom
Nexicom Systems is a wholesale distributor of telecommunications products. Located in Ontario, Canada, the company has more than 60 years of experience in helping telecommunication businesses provide leading-edge voice and data services. Many of the products Nexicom distributes are first deployed in its own network, which consists of an Independent Telephone company, an Internet Service Provider, and a Cable TV company. Nexicom technicians are constantly evaluating products to determine which ones are delivering the leading edge technology.

Tom: What are the two or three critical business issues facing your companies today?

Rick: As a colocated CLEC, a big problem for us is getting good quality copper pairs. Bell Canada pairs are not in good shape; typically cables are wet and haven’t had any maintenance in years.

Dave: We’re just starting out as a CLEC, so we haven’t really gained much experience in that area yet. In our traditional operating territory, we serve a lot of rural parts of Ontario, and getting the loop links within range of many of our DSLAMs is a big deal. We still have loop lengths upwards of 10 kilometers, so aside from investing in more remotes we are also experimenting with extended-range DSL to provide high-speed service to those customers.

We need to maintain a presence in some of our service areas where we’re competing with Rogers or Bell Canada. Clearly, their marketing dollars are far more substantial than anything that we can do.

John: We are just starting our CLEC business and co-locating in Bell’s central office. We are dependent on Bell at the present time for cable pairs. We’re finding that the quality of those pairs leaves something to be desired. In the long term, we need to look at deploying our own facilities to serve our CLEC customers.

Tim: The prime issue right now is meeting the consumer demand for bandwidth. In a world that’s ever-changing in that direction, more and more will be done through the IP network, not less. We’re trying to meet an insatiable demand and of course that has to be at rates that are affordable to the customer and at the same time ensure that Quadra is profitable. Other critical issues include providing new services that are completely user-friendly to the customer; the days of spending a lot of time training a customer are over. We’ve got to make sure that the learning curve is easy and rapid and that we can sell as many services as quickly as possible to the subscriber. And the final one is being able to provide a complete suite of services. So our target is not necessarily a large volume of customers but to provide the customers we have with all of their communications needs in a way that is profitable for us, affordable for them, and user-friendly.

Rick: I think the only viable long-term option is the fiber-to-the-curb or to-the-home. I’m not sure which is the best solution. But having said that, the cost and time to build that is a significant issue. We’re established in a dozen different communities. It could take 10 years to establish a significant fiber foothold.

Tom: What is your current services mix, and how do you see that changing over the next one to three years?

Tim: We’ve built a data network and voice network. With the current data network, we have DSL throughout our rural area and WiMAX in two surrounding communities.

As far as change, consumers are consistently demanding greater bandwidth. We will have to offer guaranteed bandwidth throughout our rural areas, which means we’ll most likely move to fiber, perhaps initially to the node, but in the longer term to the home. We also hope to expand our WiMAX network into the areas that we can’t justify a fiber build.

The other side of the service mix is the voice network and today we’re in the local and the traditional ILEC service field; we provide long distance all around areas. In terms of change, we’ve got to move towards that one number, one voicemail type system, whether it’s wireline or wireless, cellular – and it must be available anytime, anywhere.

Today, from the consumer perspective, voice is being dictated by the cellular companies, and we’ve got to try to find our place so we can participate as well.

Dave: We’re seeing the migration of services from traditional TDM to IP. For example, we’re currently in the process of moving some of our transport to IP-based facilities. We’re experimenting with that right now. One of the things that’s driving that obviously is the cost of traditional TDM services – they’re high – especially if we have to work through a third-party provider to help extend those services. It doesn’t take long to figure out that IP is far more cost-effective. So I think we’ll continue to see a migration of services to IP in the coming years.

John: From our point of view, with the CLEC business we’re hoping to get more business customers; they represent only about 17 percent of our business now. We’d like to increase that to around 35 to 40 percent. We’re also looking at fiber; there are some new subdivisions within our ILEC and CLEC service areas and we definitely are looking to serve those people with fiber. On the Internet side, about 50 percent of our ILEC customers are high-speed DSL. In the next 2 or 3 years we’ll likely move that up to 70 to 75 percent.

Rick: With our CLEC deployment, of course every customer takes our POTS service, and roughly 70 percent are taking high-speed Internet. So the take rate on the DSL is quite high. We’re hoping to offer video, but there’s no way I’d want to try to provide video service through a co-located facility that I can’t control. Our only hope to provide video is to undertake a fiber build. We will offer video as an early deployment within our ILEC territory. We do control the circuits there.

Tom: How do you see your service mix changing over the next 10 years?

John: I would see having all of our customers on our softswitch by that time. The TDM switch would be totally gone, and we would be using a lot of IP for transport and for long distance services. And there’s no question – fiber-to-the-home would become much more prevalent in any areas where we’re rebuilding. Within 10 years at least 50 percent of our customers would be served on a fiber basis.

Tim: Really solidifying relationships with each of our customers – maximizing the service mix that we’re offering. Owning 100% of our infrastructure; to do this is critical because if we’re beholden to somebody who has less concern about the network than we do, we’re simply not going to be able to provide the service. But I do see that that includes, again, wireless. We understand the consumer will want wireless as part of their service so that’s up to us to get into the wireless facilities as well.

Dave: One of the trends we see for the future is the continuation of additional community-based networks being launched which include extended LAN service for interconnection of numerous geographic locations. These networks are requiring everything from 10 Mb symmetrical service up to gigabit Ethernet services, so it’s driving the need to have fiber-based facilities right to the customer.

We see a continuation of the trend where there is an expectation to provide “city” type services in the rural communities. More people who have homes or cottages in these communities are coming from the city expecting similar services and pricing.

Rick: We plan to have the majority of our network based on fiber, but from a financial perspective, this will be quite a large undertaking.

Tom: What new sources of competition are you facing and how are you addressing these?

Tim: On the facilities-based side, we’ve been kind of in a protective bubble but that’s changing. We have limited cable company activity which is competing against us both on data and voice, but only in the more concentrated areas of our rural serving area. But it is limited to certain geographic areas. On the voice network, the facilities-based competition is cellular. Again it’s huge, but on the data side we’re confident that even with initiatives such EVDO their network can’t respond quickly enough to the consumers’ demand for broadband. But yes, the way that we have to address the facilities guys is just make sure that we’re obtaining solutions that allow us to effectively provide all those services – voice, data, cellular, and broadcast. We have to start entering their markets if we want to dissuade them from entering ours.

As far as non-facilities, this is where we have to build out guaranteed bandwidth solutions – we’re exposing ourselves to all forms of new competition. Voice, both local and long distance, and now data applications, are running on our broadband systems. YouTube, for example, is an early technology that’s preparing people to expect that all their broadcasts should be available to them on the Internet; their sitcoms, sporting events, movies, and other entertainment. We have to address this kind of non-facilities-based competition. We have to become an aggregator and a service company today – with the recognition, of course, of costs.

Rick: Our most serious competition right now comes from the local cable TV companies. Some have been purchased by larger conglomerates that will aggressively come in and launch voice service. I do think that’s one of the more serious threats to our CLEC deployment. At some point cellular providers may wake up and drop their pricing to make themselves more competitive, and that will hurt the wire line carriers. It’s probably our most serious threat. Whether they’ll change their pricing strategies or not, I don’t know. But the cellular generation that is emerging is who we have to be concerned about; they’re used to having service that’s affordable. They will tolerate less than stellar service for affordability. That is a concern.

John: The main source of competition I see in the ILEC area is that wireless is becoming more prevalent and can provide service everywhere. And there’s no question that cellular providers are planning to offer improved data services as well. To respond, we have to offer more bandwidth on our DSL so that they are not in a position to take those customers. The mobility associated with cellular is a big concern.

Tom:What new technologies are you studying now and what attracts you to them?

Tim: We are actively looking to wireless and a full IP architecture. Everything has to be IP – transport right up to the consumer. We have to walk away from the traditional network buildout. Being a newcomer into the wireless game – whether it’s wireless broadband or mobile wireless – allows us to get into it without being tied to a legacy TDN network. WiMAX does that for wireless broadband; it provides a standards base that’s going to allow us to offer a wide range of voice and data applications with a good quality of service. That provides the mobility for expansion beyond our area. For within our area, fiber is exciting for us. As a cooperative we have the resources retained financially, we don’t have to distribute these to equity shareholders. This enables us to begin that initiative maybe a bit earlier than the others are able to. The beauty of fiber to the home as well is we’re envisioning less maintenance of our system; more capability to diagnose and correct problems as they occur and all that kind of technology is exciting.

John: WiMAX-type mobility is a big thing that all of our customers want. We’re also looking at voice over IP and fiber-to-the-home and being able to offer video services.

Dave: Certainly from a challenge standpoint our wireless deployment has presented a number of obstacles. The geography in which we’ve launched our wireless service has created challenges; heavy-density tree population or rough terrain has caused coverage issues. We might set up service in the winter and then as soon as the foliage comes in we’ve got problems with coverage. In addition, there are lots of peaks and valleys, so trying to get the coverage that we need to get the bandwidth up and reliability to the customer has been an issue. So we’re learning about these pitfalls. We’ve been extremely successful in carrying out our transparent LAN service, which is the extended LAN service I was mentioning earlier.

Tom: What are your predictions for the future of the landline service industry and are you positive, concerned, or cautiously optimistic, and why?

Dave: I’m optimistic. Right now in our network we have three DMS 100s and a couple of DMS 10s, so we’re looking to obviously centralize, consolidate – standardize, I guess – on platforms we’ve got. I don’t know how many different DSL platforms we’ve got in our network right now that we’re trying to standardize on. We’re in a position to offer a different level of service to our customers from an intimacy standpoint. We’ve seen it with the swing away from the traditional ILEC and the big Bell operating areas where as soon as an alternate service provider has come in, people have swung over just because they can. They’re sick of dealing with a Bell or a Rogers and they want other choices. They don’t want to phone in and get a long-winded computer talking to them. They want intimacy with the company and I think there is a niche there for us still to operate as small independents. The biggest factor is being able to offer reliable service at a relatively competitive price. I don’t think price is everything but it certainly has to be in the range there. But provide a high-quality service and I think you’ve got it made.

Tim: The consumer wants everything and anything – the four uses of any: anything, anytime, anyhow, anywhere. When I look at the consumer I remain positive and, yes, even excited. As small companies, we can remain focused and agile. We definitely have a future and I guess we’ve always been a facilities-based company, and if we play our cards right, I think we always will be.

John: To add to what the others have said, small to medium business are looking for someone that they can talk to who will listen to what their requirements are. They want to hear that their telco is offering to meet their requirements and then do so. If they have a problem, they expect to get to someone at their telco who’s going to solve it in a timely fashion. One of our strengths is independence and size. Because we are smaller we’re more agile and I think that will give us a leg up on the larger companies.

Rick: I’m in violent agreement. We all recognize that we’re small; that allows us to be quicker to respond. It’s also our weakness. Our size is our strength and we’re able to respond quicker and more creatively to adopting new technology and new ways to provide services. On the other hand, being small, we have limited marketing budgets by comparison to the larger national carriers we may compete against. In the RBOCs’ portfolio they won’t even consider going outside of the canned list of solutions that they currently provide, so that’s a real advantage that we have. Also, nearly every customer that we gain – we’ve taken from Bell Canada – has appreciated the fact that they get to talk to a live person when dealing with our company. They really appreciate the fact that they don’t have to go through an automated Emily. (Emily was the automated call center at Bell Canada.) We just have to be able to differentiate ourselves, by responding quicker, being more nimble, and providing good quality service. I believe we have a place in the emerging marketplace. We’ll be here for the long term.