Vitamin Y: Bell Canada’s big fibre play

Context: As part of a plan to invest $20 billion in developing broadband fibre and wireless networks across Canada by 2020, Bell Canada has announced that it is investing $1.14 billion to bring Gigabit Fibe service to 1.1 million Toronto homes and businesses. Working with Toronto Hydro, and sharing use of 80,000 utility poles, the company will be able to accelerate deployment of what it is calling “the company’s single largest infrastructure build out” to connect 50,000 premises by summer’s end. On project completion, the company will have upgraded 27 Bell central offices facilities, and installed 9,000 kilometers of new fibre – 70 percent of which will be aerial and 30 percent underground. Bell Canada will begin expansion of its Fibe program to additional cities in Ontario, Quebec and the Atlantic provinces this summer as well.

Three keYs:

Blazing speed to match big investment: Bell’s new Fibe service will deliver the fastest internet speeds available – beginning with service at 940 megabits per second, and rising to the full 1,000 megabits or faster in 2016, as modem equipment suppliers develop technology to support this. To provide perspective, president of Bell residential services Rizwan Jamal observed, “with Gigabit Fibe, you can download 100 photos or songs in 3 seconds, and entire HD movie in 7 seconds, or the whole 14 GB of Orphan Black in HD – shot right here in Toronto – in less than 2 minutes.” Speeds like this will be difficult for residential and business customers alike to resist, and as a function of Bell’s deep pockets, very difficult for other ISPs – even other large market incumbents – to match.

Mayor of Toronto John Tory and George Cope, president and CEO, Bell Canada
Mayor of Toronto John Tory and George Cope, president and CEO Bell Canada

“A public partnership without public funding”: Smart cities are built on broadband connectivity, and as a result, typically depend on public sector/private sector partnerships. Bell’s Gigabit Fibe program, however, is fully funded by the company and supported (in an unspecified way) by the City of Toronto. Addressing a Toronto audience at project launch, Toronto Mayor John Tory observed: “It’s the kind of thing we are going to have to do to build a more prosperous and fair city going forward…. It’s more than just an investment or a business decision. It’s going to make a real difference to people, and to attracting investment and jobs that will have us at the forefront. We have been timid as Canadians about making the kinds of investments that will put us on top. We were the leaders and we are the leaders in telecommunications but you can’t rest on your laurels, and Bell is proving today there’s no room for that if they make this very significant investment.” In terms of economic development, Bell is claiming significant positive outcomes from its program, including the creation of 2,400 direct jobs in Toronto, and 8,000 direct and indirect jobs in Ontario, as well as $2.5 billion in economic activity over the next two years.

Closing the digital divide? As part of its commitment to the ‘fairness’ that Mayor Tory referenced in his talk, Bell is funding access in perpetuity to the new gigabit fibre service to eight Toronto United Way Community Hubs, the goal being to provide access to young innovators who may not otherwise afford the service. However, the economic impact of enhanced connectivity is more ambiguous and the intended outcome more nebulous than might be expected. While Google’s roll out of gigabit fibre service in Kansas City had the effect of driving other service provider speeds up and fees down, and encouraging the in-migration of some startups, studies of ‘fibrehoods’ conducted by Bernstein Research and the Wall Street Journal found significant penetration of Google Fibre in medium to high income neighbourhoods (75%) and significantly less (30%) in lower income neighbourhoods. As Kansas City, Mayor Pro Tempore Cindy Circo explained, “What Google did for Kansas City and the digital divide, which already existed, was put a spotlight on it.”

The bottom line: A key prerequisite for digital economic growth and the smart city phenomenon is the availability of high speed broadband at competitive rates, a measure that to now Canada has fallen short of relative to other jurisdictions such as the US. An important goal of Canada’s digital strategy has been to improve pricing for consumers through the introduction of more competition. According to CRTC data for 2013, while the large telecom service providers make up 1 percent of the 800 strong service provider community, they account for approximately 62 percent of telecommunications revenues, of which broadband service is an increasingly strategic part. Conversely, telecom service resellers, which make up 68 percent of the total population, command only 3 percent of revenues. Will Bell’s Fibe play serve to create the kind of access to superfast broadband services that can stimulate economic growth, or further ensconce structural imbalance in the Canadian telecommunications market by outstripping competitors’ ability to invest and compete on service levels? A big piece of this puzzle depends on pricing, an item that Bell CEO George Cope declined to comment on in a press conference announcing the new service as “my competition is quite likely in the room.” Cope did promise “competitive pricing” – a good sign, along with Bell’s commitment to the United Way Community Hubs. But the proof is in the putting – or in this case, in the pricing that may or may not unleash the firestorm of broad-based digital innovation that Mayor Tory and others are hoping for as they position Toronto as one of the smartest cities.

For Bell Canada CEO George Cope’s press conference address, see video below.

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