Telecom Trends

In response to Mark's request for his more frequent commenters filling the void while he is away this week, here are some thoughts on the BCE deal.

I think Diane Francis raised some very interesting issues in her column in today's Financial Post. She opens by saying the "buyout is not in the public interest and should be halted by Industry Canada".

Since the Teachers et. al. buyout was first announced, I have wondered why the CRTC and/or Industry Canada have chosen not to look at the deal in terms of the objectives that make up Canada's telecommunications policy. The key question that I think they should have been asking all along is will the highly leveraged, highly indebted company that is left at the end of the process and that will carry junk-bond status with limited or no ability to access public markets be able to contribute to the achievement of the telecom policy objectives. In other words, is this deal in the public interest?

Given the capital intensive nature of the telecom industry that is experiencing rapid technological change, will the new BCE be in a position to:
(i)contribute to "the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions"?;
(ii)"offer reliable and affordable telecommunications services of high quality (that are) accessible to Canadians in both urban and rural areas in all regions"?;
(iii)"enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications"?;
(iv)perform "research and development....and to encourage innovation in the provision of telecommunications services"?; and
(v)"respond to the economic and social requirements of users of telecommunications services"?

My humble response to all of these questions is 'I'm not sure'. But more important than that is are the CRTC and Industry Canada confident and assured that the new BCE will be able to contribute to the public interest as it is set out in the Telecommunications Act. By their not having looked at this deal through the filter of the Telecom Act, I guess it's fair to assume that they are. If that's the case, I would say they should have made public the documents and rationale that led them to this conclusion.

While it's not a certainty that the new BCE will not be able to meet the public interest test, I don't believe it's also not a certainty that it will be able to do so. How in the world could the CRTC and Industry Canada have not looked at this deal in terms of the Telecom Act with such doubts circulating around is a question that every Canadian should be asking.