Okay, so that’s a bit harsh of a title. This series of posts isn’t an instructional guide on bringing down one of the Canadian North’s largest companies. Although, if the information contained herein were adopted en masse by enough northern Canadians, Northwestel would certainly feel some pain.
No, this blog post is more about how frail Northwestel’s current business model is, as dependent as it remains on local and long distance voice services, which represented about 31% of the company’s gross revenues in fiscal 2007 (that number would have been much higher without the acquisition of WHTV’s cable service; it was about 66% in 2006).
And, while the company has a 5-year vision in progress that will have voice and long distance services reduced as a core feature of their services, for the duration they remain seriously exposed to market forces and technological developments. Granted, Northwestel is not a “real” business; it receives significant amounts of funding and subsidy. About 25% of its gross annual revenues is free money that the southern telcos must pay into Northwestel, as decreed by the CRTC (I make a point of thanking my family down south for that regularly). So the company has a tremendous amount of padding that protects it from failure and ensures its longevity.
Northwestel’s 5-year plan targets 2011 as a year by which “wireless, video , and Internet services” will become the priority. This is a sound plan and generally follows the pattern most other major telecommunications providers (both telephone and cable) have followed around the world to date. As usual, Northwestel is late to the game, but that’s okay: the company’s tardiness may help it learn from others’ mistakes.
I’m estimating that based on this vision, Northwestel is moving away from its traditional copper-based telephone infrastructure and onto the fibre-optics based network it largely acquired from WHTV last year. That would mean that all services, including its voice services, would travel over IP. This is a tremendous shift for such a little company and it will be interesting to see how they manage it.
I also estimate that, in general, their video transition is over. With the introduction of a troublesome video-on-demand service recently, Northwestel has established their video over IP service. I hope I’m wrong as, by the contemporary standards set by Tivo, Apple, Joost, Hulu, Microsoft, Sony, boxee, and many others, Northwestel’s digital cable offering is severely lacking. The service is of a relatively poor quality, remains too expensive, and lacks flexibility (i.e. you can only watch shows on your television). In short, it’s not future-proof.
On the other hand, Northwestel faces a world of opportunity with their voice and long distance services as they move towards IP. This category has been commoditized to the nth degree and, with a combination of creative thinking and moderate technical prowess, Northwestel could introduce some killer services and cut costs to consumers significantly.
While the title of this post rather dramatically suggests there’s a way to “kill” Northwestel, I’m more suggesting that the current transition to a fully IP-enabled world threatens the company’s monopoly, upon which it remains dependent. As services are lifted from a physical infrastructure onto a virtual one, they are commoditized and competition becomes very real and very widespread. And that’s one thing Northwestel’s never really had to deal with as a monopoly: competition.
Personally, I’m struggling with a few questions: does Northwestel as a state-sanctioned monopoly provide true value to Northerners in the contemporary technological and economic climate; does Northwestel still deserve its monopoly status and, if so, for what services; and, what are the key roles that Northwestel needs to play as a northern telecommunications provider?
Over the next few days I’m going to explore the services that Northwestel provides and consider alternatives that are available to northerners now. In general, compared to southern service providers, Northwestel’s services are of a lower quality and cost quite a bit more. But somehow Northwestel is broadly accepted as the default northern monopoly telecommunications provider, despite the presence of options. It doesn’t have to be this way. For example, anyone can easily save over $40 each month on residential landline services by switching to a southern provider.
Please keep in mind, these are not anti-Northwestel posts. I’m not against Northwestel (as a certain municipal leader isw well known to be). I just wonder, quite often, about the validity of its business position in the North and feel that airing these thoughts is worthwhile.