It’s on — the battle for East Coast telco dominance
Atlantic Canada’s telecom sector is extremely competitive, with the Big Four (Bell Aliant, Eastlink, Rogers and Telus) battling daily for customers. Yet the players also have internal issues and challenges. From Bell’s corporate restructuring to Rogers’ quest to improve customer service, the region’s telcos are hoping self-improvement and network expansion will strengthen their pitch and market share.
Number of Bell Aliant Internet customers in Atlantic Canada
Number of regional TV customers served by Bell Aliant
Amount Bell plans to spend on network upgrades across Atlantic Canada over the next five years
Bell Aliant’s ranks are expected to soon shrink in Atlantic Canada, but the telco’s top executive in the region says a recent and major restructuring at the company should not be seen as a retreat from Atlantic Canada.
“Absolutely not,” says Dan McKeen, Bell Aliant’s vice chair. “We still have a very significant presence in Atlantic Canada.”
On Nov. 3, Montreal-based telecom giant BCE Inc. (Bell) announced its successful privatization of Bell Aliant. Up to that point, Bell Aliant had been its own publiclytraded entity, though Bell was the largest shareholder.
The $3.95-billion privatization of one of the region’s dominant telcos raises some questions, most obviously: what does the change in structure mean for Bell Aliant’s local presence?
Troy Crandall, a telecom analyst who tracked Bell Aliant before the privatization deal, predicts a string of layoffs, transfers and early retirements as Bell seeks $100 million in “synergies” between itself and Bell Aliant.
“There’s likely to be redundancies within the mid- to upper-management levels at Bell Aliant,” he says from Montreal, where he’s a vice president with MacDougall, MacDougall & MacTier Inc.
Efficiencies will also be secured by combining the marketing efforts of Bell and Bell Aliant. “It costs a lot to have a separate brand. They’ll basically just start calling it Bell from this point on,” Crandall says, predicting Bell Aliant products, such as FibreOP, will be renamed under their Bell equivalent.
McKeen acknowledges there will be job reductions in areas of duplication between the two entities. For instance, Bell Aliant will no longer need a management team responsible for public reporting.
Outside of that, he argues, the transition will not be overly noticeable, and the company will still be based in Halifax.
“For the short-term there is no change for our customers,” he says. “And in the longerterm our customers will see benefits because the scale of Bell combined with Bell Aliant will allow us to provide more value and more services to our customers.”
A larger entity, McKeen insists, will aid customers. “In telecommunications, scale is important,” he adds. “So your ability to provide services and products to customers has a lot to do with how big you are, because it’s a capital-intensive business.”
Crandall predicts the privatization will aid Bell’s buying power.
“It’s like anything: if you can buy it in higher volumes, the better price you’re going to get,” he says. “If Bell combined with Bell Aliant now has to buy one million routers, as opposed to 700,000 routers, then they’re going to get a better deal… You get a benefit from scale.”
But the question is: who will benefit from those savings?
“Will it be passed on in the form of better services or lower prices?” Crandall wonders. “Or (perhaps) it all goes directly to Bell’s pocket. I imagine it’s probably a mixture of all three.”
Bell Aliant now provides TV, Internet, and home phone service across areas in all four Atlantic provinces. The company has 236,000 Internet customers, and 200,000 TV customers.
Bell has said it plans to spend $2.1 billion over the next five years in upgrading its network across Atlantic Canada. Included in that figure is funding to extend G4-LTE (fourth-generation, long-term evolution) wireless service to 100 small communities across the region by the end of 2015.
Eastlink, one of Bell Aliant’s main competitors in the region, already boasts a wireless network that is 100 per cent 4G LTE. So how important is it for Bell Aliant to catch up?
“We think it’s hugely important,” McKeen says. “We have been leaders in mobility from the very beginning and we have a fantastic network. It’s important for us to keep that network at the cutting edge.”
It’s probably safe to assume that nobody outside of Eastlink has a better understanding of that company’s approach and corporate culture than McKeen.
He worked at the rival telco for 24 years, including a decade-long stint where he shared the CEO title with current chief executive Lee Bragg. Does that familiarity give McKeen an advantage when trying to outmatch Eastlink? “Certainly not. It was five years ago,” he says. “We’re both battling hard to try to win customers.”
Percentage of Eastlink network that is 4G LTE (fourth generation, long-term evolution)
Number of Eastlink customers across nine provinces
Provinces currently served by Eastlink’s cellular network (N.S. and P.E.I.)
Lee Bragg recalls the criticism his family’s company, Eastlink, received as it worked to roll out its first cellular network. The Halifax-based company secured its wireless spectrum licences in 2008. But it wasn’t until 2013 that Eastlink’s $200-million wireless network was operational in Nova Scotia and Prince Edward Island.
“I read and heard some of the criticism, like why did we take so long?” Bragg recalls. “That was by design, to be honest.”
Still, he admits there was some pressure within the company to launch earlier. In 2012, management debated offering its cellular service just before Christmas, in the hope of capturing holiday business.
But Bragg’s father, John, who started the Bragg business empire with blueberry harvesting, preached a cautious approach.
“He said, ‘Well, 20 years from now nobody’s going to care if you launched in November or February. What they will remember is whether it worked or not. You missed the last 30 Christmases in the cellular business, does it matter if you miss the 31st?’ He was absolutely right. We took our time.”
The lengthy rollout, Bragg notes, allowed Eastlink to ensure its network is 100 per cent 4G LTE (fourthgeneration, long-term evolution).
“You build a network once so you want to spend that money wisely,” he adds. “That gives us a technology edge for a period of time. Our competitors ultimately will have LTE everywhere. They’ll catch up, which is fine.”
Bragg won’t say how many wireless customers have switched to Eastlink. “Not enough,” he says laughing, before adding: “We’re very pleased with the number of customers that are choosing us. We’re on target for what our expectations were, maybe a little ahead of target.”
Eastlink entered the cable television business 40 years ago and eventually added telephone and high-speed Internet to its list of services. The family-run outfit is now the fifthlargest telecommunications company in Canada, with 500,000 customers in nine provinces.
According to Bragg, further expansion in the wireless sector marks a large part of Eastlink’s growth potential.
“We’ve historically grown by buying our neighbours and then rolling out more products and services on their networks. But there are not that many neighbours to buy and those neighbours we have are either Rogers or Shaw or somebody who, to the best of my knowledge, is not going to sell me their business tomorrow,” he says. “There’s not that many little cable companies to buy. That was part of the justification to get into the cellular business.”
The company’s existing cellular network only covers Nova Scotia and P.E.I., but Eastlink has spectrum in most of the areas across Canada where it holds cable infrastructure, including in areas of Ontario and Alberta.
Bragg says the company is now in the process of planning a network expansion, with site acquisition, engineering, and property rental (for roof-top transmitters) all underway. “We are getting ready to launch and construct in other areas,” he said.
Montreal-based telecom analyst Troy Crandall says Eastlink now benefits from having a “quad bundle” of TV, landline telephone, Internet and wireless services. “That is very attractive from a marketing standpoint,” he says.
But there are major challenges facing the company as it works to expand its wireless presence, he adds.
“The biggest challenge for them… is renting out the land to put a tower on, paying for the tower, installing the tower, getting permissions for the tower, and then multiplying that 2,000, 3,000 or 4,000 times. You need a lot of towers,” Crandall says. “Building a wireless network isn’t something you go out and do overnight. It’s slow.”
But as Eastlink’s approach to erecting a wireless network in Nova Scotia and P.E.I. revealed, the company won’t be rushed.
Concluded Bragg: “We just took our time and wanted to make sure we did it right.”
Rogers has the highest “turn rate” ranking among Canada’s big three wireless companies
Amount Rogers spent upgrading its service in N.B. and N.S. over two years
Number of Rogers’ employees across the country
When it comes to customer service in the wireless industry, Rogers Communications is often Canada’s whipping boy. If there are complaints about service, it’s quite likely Rogers is involved, or so it often seems. Is it an unfair perception?
“No, I wouldn’t say it is,” says Montrealbased telecom analyst Troy Crandall. “The numbers back that up.”
Crandall says Rogers, in the most recent quarter, had the highest “turn rate” of the country’s Big Three wireless companies. In other words, Rogers had more wireless customers abandon its service than either Telus or Bell.
“You can come to your own conclusion, but if you have a lot of people leaving… there must be some type of dissatisfaction, whether it’s on customer service or on price or the phone selection,” Crandall says. “People typically don’t leave if they’re satisfied.”
The most recent quarter saw Rogers shed 30,000 cable subscribers across Canada. “As bad as it sounds, it’s actually a slight improvement from the 39,000 cable subscribers they lost in the same quarter of last year,” Crandall adds. “There’s something obviously causing them to move on to someone else.”
Customer service is clearly an area Rogers is trying to address.
On Oct. 28, the Toronto-based company announced that Deepak Khandelwal would serve as the company’s chief customer officer. Khandelwal was previously at Google, where he served as vice president of Global Customer Experience. Prior to Google he worked at McKinsey & Company.
“Deepak brings a unique combination of management consulting and customer operations experience that we need to turn the customer experience around,” said Rogers president and CEO Guy Laurence. “Improving customer experience is a journey not a destination, but this is a big step in the right direction.”
In Atlantic Canada, Rogers offers wireless in all four provinces, as well as cable and Internet in areas of New Brunswick and Newfoundland. The company says it recently spent $80 million over two years upgrading its network in Nova Scotia and New Brunswick.
The company’s Atlantic president, Ken Marshall, acknowledges that customer service is an issue, but says it shouldn’t dissuade customers.
“We can read the public opinion polls but I can tell you that in Atlantic Canada we work exceptionally hard to make sure that we deliver a top-notch customer service experience,” he said. “When you have a company the size of this, with 30,000 employees coast to coast and millions and millions of customers, we want to make sure that every customer gets properly served and properly treated.”
According to Marshall, the company’s strength lies in the scope of its assets: from wireless and cable service to radio stations in Halifax, TV stations in New Brunswick, as well as a roster of national magazines and, now, NHL broadcast rights worth $5.2-billion.
“The scope and breadth that Rogers possesses… is second to none,” he says. “Rogers’ reach probably surprises a lot of people.”
Rogers has another advantage in the Atlantic Canadian market, Crandall notes.
“They are, unlike Telus, able to provide a bundle. That is a pretty strong competitive advantage — being able to provide the wireless, the television, Internet and landline. A lot of people don’t want to deal with four different service providers. They just want one bill each month. And if they get a discount for taking three or four services, well then they’re even more happy.”
The question for Rogers is: will those customers, once secured, actually stay? Or will poor customer service drive them elsewhere?
Amount Telus has invested into its Atlantic Canada network since 2000
Amount Telus plans to spend on new infrastructure, spectrum and other operations in Atlantic Canada through 2016
Increase in number of Telus’ Atlantic Canada employees in recent years
François Gratton admits that this region’s telco heavyweights — Bell Aliant, Eastlink and Rogers — overshadow his company, Telus.
“We’re probably a little bit less known than the others, but we’ve actually invested heavily in Atlantic Canada over the years,” says Gratton, Telus’ president for Quebec and Atlantic Canada.
Based in Toronto, Telus entered the Atlantic Canadian market in 2000 with its acquisition of Clearnet. The company says it has since pumped more than $1.1 billion into its Atlantic Canada network.
According to Gratton, the company — which is best known as a wireless provider — is investing $640 million in new infrastructure, spectrum and other operations in Atlantic Canada through 2016.
So how does Telus intend to overcome the strength of its bigger rivals in the region? In part by proving it’s better at customer service.
“We only have five per cent (653) of the complaints nationally, whereas Bell has 32 per cent and Rogers has 21 per cent. We’re very proud of that fact,” Gratton says, referring to 2013-14 figures from Canada’s Ombudsman for telecommunications complaints.
Plus, Telus’ total number of complaints dropped by 26 per cent, while industrywide complaints increased.
What explains the drop? “Only one thing,” Gratton says, “our absolute focus on the customer and our quest to be the most recommended company in our industry.”
He adds: “There’s no amount of advertising that can replace a referral.”
According to Gratton, Telus has made “deep changes” in the way it serves customers. Normally, telco call centre workers are assessed based on the number of calls they field, thus agents want to finish each call quickly, to ensure a high call volume.
“We got rid of that and our call centre agents are now evaluated on one simple metric: did you solve the customer issue the first time they called? That’s it. That’s been a radical change.”
Telus’ customer service push appears to be working.
Telecom analyst Troy Crandall notes that, in the most recent quarter, Telus had the lowest “customer turn rate” of all the wireless carriers in North America. In other words, it had the fewest number of customers abandoning the company.
“That’s a pretty compelling argument that they are doing the right things and they are keeping the customers happy,” Crandall says. “The numbers speak for themselves in terms of customer retention and customer satisfaction.”
Telus’ disadvantage, Crandall points out, is that unlike Eastlink, Rogers and Bell (whose wireless network it shares), Telus does not offer a full suite of products in Atlantic Canada.
“Having the opportunity to do bundling is obviously a competitive advantage,” Crandall says.
He points to new entrants in Ontario and Western Canada that only sell wireless, such as Mobilicity and WIND Mobile. “There have been some hiccups for them in attracting clients because a lot of clients want to do all their business with one company,” he says. “That does put Telus at somewhat of a disadvantage over Rogers and Eastlink and Bell Aliant. That’s probably part of the reason why they have the lowest market share of the Big Three in Eastern Canada.”
Gratton won’t disclose Telus’ Atlantic Canadian customer figures. Instead, he points to the company’s growing employee base. He says Telus has 450 employees in the region, a number that has grown by 21.5 per cent in recent years.
“That number is growing very fast,” he says. “And that’s been to support the growth in the area.”
He added: “Looking at the opportunities in front of us, I suspect we will continue to grow along the same trend in the future.”
Number of cities serviced by DSM (Halifax, Saint John, Moncton, and Fredericton
Year DSM Telecom was launched by former Sprint Canada executive, Dan Merzetti
Amount of personal funds that Merzetti has invested in digital phone service
As a new entrant in the telecom field, Dan Merzetti is taking on the regional giants of the sector, including Eastlink and Bell Aliant.
Merzetti is the founder and president of DSM Telecom, a Halifaxbased independent telco that started with phone service and is now expanding into Internet.
The company’s main offering is digital phone service for businesses. The service is run through a private digital data connection, meaning clients can take calls through a laptop, smartphone or tablet. The company also offers web conferencing and long-distance calling.
At this point, DSM’s phone service is available in Halifax, Saint John, Moncton, and Fredericton. Merzetti plans to expand into other Atlantic Canadian centres in the coming months.
DSM is also expanding its offering through a joint-venture partnership to include Internet and cloud-based IT services.
Thus, like the big guys, Merzetti will be able to bundle his company’s products.
“It means we can offer more services to clients. It’s more value,” he says. “If you can offer more to each customer you are more likely to get them and retain them.”
To this point, Merzetti’s pitch has been quality and price. Although he won’t reveal the company’s prices, he insists his service is 30 per cent to 40 per cent cheaper than those secured through the big phone companies.
“People want an alternative from a smaller, local player,” he says.
DSM’s customer list includes the Halifax Port Authority, Destination Halifax, Sampling Technologies Inc., and Admiral Administration. And Merzetti believes his client roster will grow thanks to the company’s additional offerings.
A native of Saint John, Merzetti headed Sprint Canada’s Atlantic operations before launching DSM in 2001. At first he was a Rogers wireless dealer, and later sold longdistance and conferencing services.
In 2010 he put up $100,000 of his own money to push DSM into digital phone service, a first in Atlantic Canada.
“We had to create a name for ourselves, which was difficult,” he admits. Slowly the company built a list of clients to serve as references. “Now people know us,” he says. “We don’t get asked ‘who are you?’ as much.”