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Bell Acquires Manitoba Telecom for $3.9 Billion; Cell Phone Rates Expected to Rise

bell badBCE, Inc., the parent company of Bell Canada, has acquired Manitoba Telecom Services, Inc. (MTS), in a deal worth $3.9 billion, further enlarging Canada’s largest telecommunications company.

“Under the terms of this transaction, MTS will achieve much more than it could have as an independent company,” Manitoba Telecom president and CEO Jay Forbes said in a conference call with analysts. “BCE’s commitment to invest $1 billion over five years into Manitoba’s telecommunications infrastructure will also contribute greatly to the prosperity of our province and the quality of our customer experience.”

Many MTS customers and consumer advocates disagree with Forbes’ assessment, noting the deal will further consolidate Canada’s wireless marketplace by eliminating the province’s largest wireless carrier – MTS. The wireless business has nearly 500,000 customers – by far the largest provider in the region. Under the deal, BCE will sell off about one-third of MTS’ customers and retail storefronts to competitor Telus in a separate transaction.

Manitoba and neighboring residents in Saskatchewan pay some of the lowest prices for telecom services in Canada. MTS offers unlimited, flat rate Internet plans for both its broadband and wireless customers — plans likely to disappear or become more expensive after Bell takes over. The result, according to one Canadian telecom expert, will be higher rates.

“With MTS out of the way — and Bell and Telus sharing the same wireless network — prices are bound to increase to levels more commonly found in the rest of the country,” lawyer Michael Geist wrote on his blog.

The deal is also likely to deliver a death-blow to a government commitment assuring Canadians of at least four competing choices for wireless service. If Bell’s buyout is approved by regulators, Manitoba will be served by just three competitors — all charging substantially more than MTS.

...but soon we'll be with Bell.

…but soon we’ll be with Bell.

“Compare Bell’s wireless pricing for consumers in Manitoba and Ontario,” offered Geist. “The cost of an unlimited nationwide calling share plan in Manitoba is $50. The same plan in Ontario is $65. The difference in data costs are even larger: Bell offers 6GB for $20 in Manitoba. The same $20 will get you just 500MB in Ontario. In fact, 5GB costs $50 in Ontario, more than double the cost in Manitoba for less data. The other carriers such as Rogers and Telus also offer lower pricing in Manitoba. The reason is obvious: the presence of a fourth carrier creates more competition and lower pricing.”

That Manitoba Telecom would be up for sale at all came as a result of its controversial privatization in 2006 under a previous Conservative provincial government. The decision to privatize came despite a commitment from then-Premier Gary Filmon that Manitoba Telecom should remain a provincially-owned telecom company. Critics point to one possible reason for the flip-flop. Shortly after leaving politics, Filmon was appointed to the board of directors of the privatized company and was given $1.4 million in director fees and compensation over ten years, along with company shares with hundreds of thousands of dollars.

Economist Toby Sanger compared costs and returns of Manitoba Telecom and SaskTel, Saskatchewan’s publicly-owned telecommunications company. After two decades, the cost of a basic landline with SaskTel is $8 less per month than MTS, and SaskTel paid $497 million in corporate income taxes to the citizens of Saskatchewan – SaskTel’s shareholders – over the past five years, compared to $1.2 million paid by MTS over the same time period. In 2014, the CEO of SaskTel earned $499,492 compared to $7.8 million paid to the CEO of MTS for managing a very similar sized operation.

The acquisition will be reviewed by the Canadian Radio-television and Telecommunications Commission, the Competition Bureau and Industry Canada, and could be approved later this year or early 2017.

Big City Telecom Infrastructure is Often Ancient: Conduits 70+ Years Old, Wiring from 1960s-1980s

A panel electromechanical switch similar to those in use in New York until the 1970s.

A panel electromechanical switch similar to those in use in New York until the 1970s. They were installed in the 1920s.

As late as the 1970s, New York Telephone (today Verizon) was still maintaining electromechanical panel switches in its telephone exchanges that were developed in the middle of World War I and installed in Manhattan between 1922-1930. Reliance on infrastructure 40-50 years old is nothing new for telephone companies across North America. A Verizon technician in New York City is just as likely to descend into tunnels constructed well before they were born as is a Bell technician in Toronto.

Slightly marring last week’s ambitious announcement Bell (Canada) was going to commence an upgrade to fiber to the home service across the Greater Toronto Area came word from a frank Bell technician in attendance who predicted Bell’s plans were likely to run into problems as workers deal with aging copper infrastructure originally installed by their fathers and grandfathers decades earlier.

The technician said some of the underground conduits he was working in just weeks earlier in Toronto’s downtown core were “easily 60-70 years old” and the existing optical fiber cables running through some of them were installed in the mid-1980s.

At least that conduit contained fiber. In many other cities, copper infrastructure from the 1960s-1980s is still in service, performing unevenly in some cases and not much at all in others.

Earlier this year, several hundred Verizon customers were without telephone service for weeks because of water intrusion into copper telephone cables, possibly amplified by the corrosive road salt dumped on New York streets to combat a severe winter. Verizon’s copper was down and out while its fiber optic network was unaffected. On the west coast, AT&T deals with similar outages caused by flooding. If that doesn’t affect service, copper theft might.

munifiber

Fiber optic cable

Telephone companies fight to get their money’s worth from infrastructure, no matter how old it is. Western Electric first envisioned the panel switches used in New York City telephone exchanges until the end of the Carter Administration back in 1916. It was all a part of AT&T’s revolutionary plan to move to subscriber-dialed calls, ending an era of asking an operator to connect you to another customer.

AT&T engineer W.G. Blauvelt wrote the plan that moved New York to fully automatic dialing. By 1930, every telephone exchange in Manhattan was served by a panel switch that allowed customers to dial numbers by themselves. But Blauvelt could not have envisioned that equipment would still be in use fifty years later.

As demand for telephones grew, the phone company did not expand its network of panel switches, which were huge – occupying entire buildings – loud, and very costly to maintain. It did not replace them either. Instead, newer exchanges got the latest equipment, starting with more modern Crossbar #1 switches in 1938. In the 1950s, Crossbar #5 arrived and it became a hit worldwide. Crossbar #5 switches usually stood alone or worked alongside older switching equipment in fast growing exchanges. It occupied less space, worked well without obsessive maintenance, and was reliable.

It was not until the 1970s that the Bell System decided to completely scrap their electromechanical switches in favor of newer electronic technology. The advantages were obvious — the newer equipment occupied a fraction of the space and had considerably more capacity than older switches. That became critical in New York starting in the late 1960s when customer demand for additional phone lines exploded. New York Telephone simply could not keep up with and waiting lists often grew to weeks as technicians looked for spare capacity. The Bell System’s answer to this growth was a new generation of electronic switches.

The #1 ESS was an analog electronic switch first introduced in New Jersey in 1965. Although it worked fine in smaller and medium-sized communities, the switch’s software bugs were notorious when traffic on the exchange reached peak loads. It was clear to New York Telephone the #1 ESS was not ready for Manhattan until the bugs were squashed.

Bell companies, along with some independent phone companies that depended on the same equipment, moved cautiously to begin upgrades. It would take North American phone companies until August 2001 to retire what was reportedly the last electromechanical switch, serving the small community of Nantes, Quebec.

ATT-New-York-central-office-fire-300x349

A notorious 1975 fire destroyed a phone exchange serving lower Manhattan. That was one way to guarantee an upgrade from New York Telephone.

On rare occasions, phone companies didn’t have much of a choice. The most notorious example of this was the Feb. 27, 1975 fire in the telephone exchange located at 204 Second Avenue and East 13th Street in New York. The five alarm fire destroyed the switching equipment and knocked out telephone service for 173,000 customers before 700 firefighters from 72 fire units managed to put the fire out more than 16 hours later. That fire is still memorialized today by New York firefighters because it injured nearly 300 of them. But the fire’s legacy continued for decades as long-term health effects, including cancer, from the toxic smoke would haunt those who fought it.

The New York Telephone building still stands and today also houses a street level Verizon Wireless retail store.

New York Telephone engineers initially rescued a decommissioned #1 Crossbar switch waiting to be melted down for scrap. It came from the West 18th Street office and was cleaned and repaired and put into emergency service until a #1 ESS switch originally destined for another central office was diverted. This part of Manhattan got its upgrade earlier for all the wrong reasons.

Throughout the Bell System in the 1970s and 80s, older switches were gradually replaced in favor of all electronic switches, especially the #5 ESS, introduced in 1982 and still widely in service today, serving about 50% of all landlines in the United States. Canadian telephone companies often favored telephone switches manufactured by Northern Telecom (Nortel), based in Mississauga, Ontario. They generally worked equally well as the American counterpart and are also in service in parts of the United States.

The legacy of more than 100 years of telephone service has made running old and new technology side by side nothing unusual for telephone companies. It has worked for them before, as has their belief in incremental upgrades. So Bell’s announcement it would completely blanket Toronto with all-fiber service is a departure from standard practice.

For Bell in Toronto, the gigabit upgrade will begin by pushing fiber cables through existing conduits that are also home to copper and fiber wiring still in service. If a conduit is blocked or lacks enough room to get new fiber cables through, the Bell technician predicted delays. It is very likely that sometime after fiber service is up and running, copper wire decommissioning will begin in Toronto. Whether those cables remain dormant underground and on phone poles for cost reasons or torn out and sold for scrap will largely depend on scrap copper prices, Bell’s budget, and possible regulator intervention.

But Bell’s upgrade will clearly be as important, if not more so, than the retirement of mechanical phone switches a few decades earlier. For the same reasons — decreased maintenance costs, increased capacity, better reliability, and the possibility to market new services for revenue generation make fiber just as good of an investment for Bell as electronic switches were in the 1970s and 1980s.

AT&T produced this documentary in the mid-1970s about how New York Telephone recovered from a fire that destroyed a phone exchange in lower Manhattan and wiped out service for 173,000 customers in 1975. The phone company managed to get service restored after an unprecedented three weeks. It gives viewers a look at the enormous size of old electromechanical switching equipment and masses of phone wiring. (22:40) 

Gigabit Fever Hits Toronto: Bell Introducing Gigabit Fiber Internet Across Entire GTA

bellBell Canada will invest $1.14 billion to bring gigabit fiber to the home service to more than one million homes and apartments in the Greater Toronto Area (GTA) over the next three years.

It will be the largest fiber build ever attempted in North America, and will serve every home and business in the GTA, beginning with 50,000 homes and businesses that will be upgraded to all-fiber service this summer.

“This is something that quite frankly none of us could have imagined just a few years ago,” Bell Canada president and CEO George Cope said at a press conference this morning. “This will be 20 times faster (than average Internet speeds) and it really is building for the consumer what large, large enterprise would have had just a few years ago for their corporations.”

gtaToronto will be the fastest broadband city in North, Central, and South America when Bell is finished laying 9,000 kilometers of fiber underground and on 80,000 Bell and Toronto Hydro utility poles. At least 27 Bell telephone exchanges will be fully upgraded to 100% fiber service, eliminating huge swaths of older copper wiring. At least 2,400 new jobs will be created, but Bell and Toronto city officials are convinced an all-fiber optic network will attract even more jobs and help broaden Toronto’s digital economy.

Bell’s project in Toronto will be vastly larger than AT&T U-verse with GigaPower, Comcast’s 2Gbps fiber service, and Google Fiber because:

  • It will actually exist, unlike fiber to the press release announcements of phantom fiber upgrades from Comcast and AT&T that serve only a miniscule number of customers;
  • Will not rely on “fiberhoods” and will deliver fiber service to every home and business and every neighborhood across the entire GTA.

No pricing has yet been announced but Bell promised it would be competitive with other gigabit broadband projects in North America. That likely means Toronto residents will pay between $70-100 a month for gigabit service. No details about usage caps or allowances were included in the announcement.

Bell is already upgrading some of its existing Fibe network in other cities to deliver gigabit speeds on a more limited basis in Atlantic Canada (Bell Aliant) and in select cities in Ontario and Quebec as part of a $20 billion network upgrade.

CP24 carried this morning’s press conference introducing Bell Gigabit Internet across Toronto. (19:51)

CBS Introducing a Showtime Broadband-Only Streaming Video Subscription Service

Phillip Dampier June 3, 2015 Bell (Canada), Canada, Competition, Consumer News, Online Video Comments Off on CBS Introducing a Showtime Broadband-Only Streaming Video Subscription Service

showtimeFollowing the footsteps of HBO Now, CBS Corporation is preparing to offer a broadband-only streaming video version of Showtime.

Variety reports a formal announcement is due this week for the service and just like HBO Now, it will initially launch as an Apple TV exclusive, with other platforms added later.

No information about the depth of the online Showtime on-demand catalog is available yet, but the pricing for the service is: $10.99 a month. It will launch July 12. HBO Now costs $15 a month.

CBS has gotten experience in the streaming video market with its $6/mo CBS All Access service, which offers on-demand viewing of decades of CBS programming and all episodes of current CBS series. In markets where CBS owns its local affiliate, live streaming is also available.

Showtime will also be expanding into Canada for the first time in January, to be made available on Bell Media platforms including Fibe TV and its direct to home satellite service.

This article updated to reflect pricing and launch date of the service.

HissyFitWatch: Bell Loses Net Neutrality Case, Threatens to Bury Complaining Consumers In Legal Fees

The first "bricks of paper" arriving from Bell's attorneys in the case of Bell v. Ordinary Canadian consumers

The first legal “bricks of paper” arriving from Bell’s attorneys in the case of Bell v. Ordinary Canadian consumers arrived at the home of Jean-François Mezei of Pointe-Claire, Que.

A Manitoba university student and consumer groups who won their case against Bell’s preferential treatment of its mobile streaming video service are now being threatened with demands they personally cover Bell’s legal expenses as the phone company appeals the ruling in court.

The dispute involves Bell Mobile TV Service — a $5/mo optional add-on that allows Bell’s mobile customers to stream up to 10 hours of video programming, some of it from Bell-owned television networks like CTV, without it counting against the customer’s usage cap. Each additional hour costs $3. The service prices usage based on time, not data usage, which lets Bell stream very high quality video to customers. Competitors like Netflix do not have this option and their customers are billed based on the amount of data consumed, which is around 800 percent higher than what Bell Mobile TV charges.

University of Manitoba graduate student Benjamin Klass filed a complaint with the Canadian Radio-Television and Telecommunications Commission (CRTC) in 2013 accusing Bell of violating Net Neutrality and creating an anti-competitive marketplace for online video. ​Twelve of the 43 channels available on Mobile TV — including CTV, TSN and The Movie Network — are owned by Bell Media, a subsidiary, like Bell Mobility, of the media behemoth BCE.

Klass alleged the practice was a clear violation of Canada’s laws governing broadcasting: “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.”

The CRTC agreed with Klass and in late January ruled in favor of Klass’ complaint, giving Bell and Quebec-based Vidéotron (which offers a similar service) until the end of April to close them down in their present form.

BCE, the parent of Bell Mobility, told the CBC it was “shocked” by the CRTC’s ruling, suspecting the complaining groups mislead regulators into thinking Bell favored its own content over others.

“There’s a hint here that the government believes Bell Mobile TV delivers only Bell Media content,” spokesman Jason Laszlo said. “They should know we offer mobile TV content from all of Canada’s leading broadcasters in English and French.”

Bell_Mobility logoLaszlo added Bell-owned content only comprises 20% of Bell Mobile TV programming and that the ruling would deprive more than 1.5 million current Bell Mobile TV subscribers from getting the service after the spring deadline to shut it down.

The CRTC and consumer groups argue that is beside the point.

“At its core, this decision isn’t so much about Bell or Vidéotron,” CRTC chair Jean-Pierre Blais said at a breakfast luncheon in London, Ont., in late January. “It’s about all of us and our ability to access content equally and fairly, in an open market that favours innovation and choice. The CRTC always wants to ensure ­— and this decision supports this goal ­— that Canadians have fair and reasonable access to content. It may be tempting for large vertically integrated companies to offer certain perks to their customers. But when the impetus to innovate steps on the toes of the principle of fair and open access to content, we will intervene.”

Consumer group OpenMedia says Bell’s motivation isn’t to create a level playing field or provide customers with more options for online video. It’s about artificially inflating the cost of accessing services like Netflix and other independent video companies that are innovating away from the traditional pay television package.

“Bell is doing everything in its power to make the Internet more like cable TV,” said OpenMedia campaigns manager Josh Tabish. “They want the power to pick and choose what we see by forcing competing services into a more expensive toll lane online.”

Klass (Image: CBC)

Klass (Image: CBC)

Bell’s legal strategy going forward is an homage to the one American wireless companies used for years to avoid Net Neutrality.

Bell Mobility argues that Bell Mobile TV is a broadcasting service, not a telecommunications service and therefore doesn’t fall under the jurisdiction of the Telecommunications Act.

Since the CRTC was not receptive to that argument, Bell is taking the matter to the Federal Court of Appeal, asking it to overturn the CRTC ruling and grant the company court and legal costs paid for by the Canadian consumers that brought the original complaint.

Jean-François Mezei of Pointe-Claire, Que. is among them and has been the unhappy recipient of several parcels containing “bricks of paper” from FedEx he suspects is just the beginning.

Mezei has been tweeting about ongoing developments in the case, and asked Bell, “how come you have no press release bragging about how Bell Mobility is suing individual citizens who participated in [the CRTC complaint]?”

Klass told CBC News he hasn’t yet made up his mind how to respond to the court filing, but admitted it is unnerving.

“In that regard, it really strikes me as a method of intimidation,” he said. “Right off the bat, it has a chilling effect. It appears that Bell is simply pursuing the argument, that it unsuccessfully made to the CRTC, through the court.”

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