March 8, 2005

Bell Canada & Craig McCaw do VOIP

Will wonders ever cease? Bell Canada moves into the U.S. telecom market through a US$100-million investment in Craig McCaw's Clearwire Corp., AND Bell takes an equity stake in a wireless broadband entity with arch-rival Rogers Communications. So, what gives?
Let's break down the two deals: Bell Canada desperately needs to find
new ways to jump-start revenue, which is pretty much flat as IP
technology gains more of foothold and the carrier's higher-margin
legacy business disappears. By striking a deal to provide Internet
telephony and other services/applications to Clearwire, Bell is placing
a big bet broadband wireless is ready for prime time. If Bell and McCaw
are right, Bell will start to see a new source of cash flow in. This
will be just fine with McCaw, who needs value-added services to differentiate his service from carriers and cablecos offering
high-speed access.
As for Bell taking an indirect stake in Inukshuk
– Canada's version of Clearwire – by purchasing shares in McCaw's NR
Communications, I'm not quite sure how it makes sense or how it fits
Bell's strategic future. I guess it's a way for Bell to take advantage
of the potential emergence of broadband wireless in Canada while, at
the same
time, making sure Rogers doesn't reap all of benefits if it does become
popular. When Scott Thomson, Bell's vice-president of strategy, said
Bell was “looking forward to working with Rogers”, I almost bit my
tongue. It's like Gary Bettman and Bob Goodenow
declaring themselves fast friends and hammering out a new deal for the
NHL. There is some thought Bell and Rogers could use Inukshuk to get
into the residential high-speed Internet access market in Western Canada. In any event,
Ted Rogers and BCE CEO Michael Sabia have a lot of 'plaining to do
because there's a lot more to this story than meets the eye.

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