Donald A. Stuart Product Report 14 May 2003 Bell Nexxia Network Services Summary Bell Nexxia has positioned itself as a full-service provider for business users across Canada and should certainly be considered by clients about to sign contracts for voice/data networking service needs. Commentary On 7 May 2003, BCE and Bell Canada announced a new business structure based on three business divisions serving different customer segments Consumer Markets Group, Small and Medium Business Division and the Enterprise Division. Bell Nexxia will cease to exist as a separate brand and will become part of Bell Canada s new organizational structure as a result of this action. Don Stuart On 18 June 2003, AT&T Canada Inc. announced that it would do business going forward under the corporate name Allstream Inc.-Don Stuart Table of Contents Overview Analysis Pricing Competitors Strengths Limitations Insight List Of Figures Figure 1: Map of Canada Figure 2: Corporate Structure of BCE Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.
Corporate Headquarters Bell Nexxia Inc. 483 Bay Street, Floor 6N Toronto, ON M5G 2E1, Canada Tel: +1 877 463 9942 Internet: www.bellnexxia.com Overview Bell Nexxia was created in the latter part of 1998, just prior to the official breakup of the Stentor alliance. The company officially launched services in early 1999, coincidental with Stentor s demise. The partners in Bell Nexxia include Bell Canada, Aliant (formed from the merger of NBTel, Maritime Telephone & Telegraph, NewTel and Island Telephone the maritime provincial telephone companies), Manitoba Telecom (MTS), SaskTel and Bell West/Bell Intrigna (the MTS/Bell Canada joint venture set up to sell services in Alberta and British Columbia). These partners combine to offer services across all of Canada via a coast-to-coast IP broadband fiber network (running at Optical Carrier rate-192 [OC-192]) with over 100 points of presence (POPs) throughout the country and which employs nine multiprovincial Synchronous Optical Network (SONET) rings and multiprotocol label switching (MPLS) technology. Bell Nexxia also has network connectivity to the United States. Figure 1: Map of Canada 14 May 2003 2
Source: Gartner. The following chart provides an overview of the corporate structure for Bell Canada enterprises (BCE), the parent company of Bell Canada, of which Bell Nexxia is a part. Figure 2: Corporate Structure of BCE 14 May 2003 3
Source: Gartner. According to figures published by the Canadian telecom regulatory authority (the Canadian Radiotelevision and Telecommunications Commission [CRTC]), total telecom revenue in Canada for 2001 was about CDN$32 billion, a more than 11 percent increase over the CDN$28.7 billion figure reported for 2000. Wireless revenue grew by over 17 percent, from CDN$5.8 billion in 2000 to CDN$6.8 billion in 2001, while wireline revenue grew by over 10 percent, from CDN$22.9 billion in 2000 to CDN$25.2 billion in 2001. Bell Canada claimed about CDN$11.7 billion of the wireline revenue in 2000 and about CDN$12.5 billion of the wireline revenue in 2001 (accounting for about 50 percent of the total market for each year). Wireline revenue for 2002 stayed around CDN$12.5 billion. Bell Canada/Bell Mobility wireless revenue was about CDN$1.52 billion in 2000, increasing to CDN$1.84 billion in 2001. Both figures represent slightly more than 25 percent of the total market in each year. For 2002, Bell Canada s/bell Mobility s wireless revenue increased to around CDN$2.17 billion. 14 May 2003 4
Analysis Bell Nexxia s asynchronous transfer mode (ATM)/frame relay network already reaches all of the major metropolitan centers across Canada and contains 100 core ATM switches and over 200 edge switches. Bell Nexxia also built the CA*net3 nationwide IP network in partnership with Canarie. Bell Nexxia has a SONET/dense wave division multiplexer (DWDM) transport network with 16 light wavelengths lit in two fiber strands operating over multiple SONET rings extending across the country. In addition to traditional voice services, Bell Nexxia offers a wide range of data networking and remote access capabilities, including Frame Relay Service, ATM Service, Enterprise Management Solutions, Integrated Access Solutions, IP Connect Service, IP Virtual Private Networking (VPN) Service, Transparent LAN (TLS) Service, IP Hosting and Security Services, Digital Subscriber Line (DSL) Service and more. Wireless services are also available through BCE Mobile/Bell Mobility, another Bell Canada company. Bell Nexxia s frame relay service supports connection speeds ranging from 64 Kbps (Digital Signal Level 0 [DS0]) to as high as 45 Mbps (DS3) and gives customers the option of premises-based service and network management capabilities. Frame relay-to-atm interworking, LAN-to-LAN interconnection and voice-over-frame relay offerings are also supported, with a switched virtual circuit (SVC) offering planned for future availability. According to the vendor, the frame relay services are offered in 1,500 areas across Canada. The ATM service supports interfaces running at 45-Mbps (DS3) and 155-Mbps (OC-3) speeds and includes managed service offerings to also cover customer equipment needs. According to the vendor, ATM services are offered in nearly 100 cities throughout Quebec and Ontario and in about 10 major cities in the other provinces, including Calgary, Edmonton, Fredericton, Halifax, Regina, Saint John, St. Johns, Vancouver, Victoria and Winnipeg. Bell Nexxia also offers Enterprise Management Solutions, a complete management service for corporate WANs that includes options for network monitoring and management, as well as customer hardware equipment and software needs. Various on-site maintenance packages are also offered to suit the needs of diverse customers. IP Connect is a nationwide IP connectivity service for large business customers, offering three access options dial-up, dedicated and high-speed DSL along with end-to-end management and network availability guaranteed at 100 percent. Dial-up access is supported from over 70 POPs at speeds of up to 56 Kbps. Dedicated access is available in over 15 major Canadian cities at speeds from 56 Kbps to 622 Mbps (OC-12). DSL connectivity options include both asymmetric DSL (ADSL) and symmetric DSL (SDSL), with speeds as high as 3 Mbps for downloading and up to 640 Kbps for uploading and are currently offered in Montreal, Ottawa, Quebec City and Toronto, with additional cities planned for future deployment. Bell Nexxia also offers a variety of value-added IP services, including e-business, e- commerce and e-learning solutions, with e-business and e-commerce offerings primarily supplied via BCE Emergis. Bell Nexxia s VPN service offers fully managed corporate intranet and extranet packages with secure Remote Access options and LAN-to-LAN connectivity, with services available through over 70 POPs nationwide. Remote users can select from three basic options, including dial-up with 40 hours per month, dial-up with 200 hours per month or always-on DSL service. A Managed Transport LAN service and an Ethernet Inter-network service are offered to connect diverse LANs across a WAN. The management of customer equipment can also be included with the service under Bell Nexxia s Enterprise Management Services. The Ethernet offering supports speeds from 1.5 Mbps to 1 Gbps (using a variety of industry-standard interfaces, including T1, 4/16-Mbps Token Ring, 14 May 2003 5
10/100-Mbps Ethernet, Gigabit Ethernet and ADSL) and is planned for availability over the national network reaching over 100 cities. Global Private Line services are offered between Canada and about 90 other countries, with speed options ranging from 64 Kbps to full T1/E1 service, as well as with support for half-circuit and full-circuit service. Overall, Bell Nexxia offers a more robust set of services and provides broader geographic coverage throughout Canada in comparison to its competition. Nevertheless, its primary competitors (AT&T Canada, Telus and Sprint Canada), as well as its secondary competitors (the competitive local exchange carriers, or CLECs, such as Group Telecom), are continuing to build out their networks and enhance their service suites. Pricing Pricing information was not available from Bell Nexxia for inclusion in this report. It is suggested, in any event, that clients contact the vendor directly to negotiate pricing based on volume needs, including options for bundled service packages and possible discounts for various contract term commitments. Clients are also urged to gather bids from Bell Nexxia s primary competitors, such as AT&T Canada, Telus, Sprint Canada, Group Telecom and others, before committing to any long-term contract agreements. GSA Pricing Does not apply. Competitors As already mentioned, Bell Nexxia s primary nationwide competitors include AT&T Canada, Telus and Sprint Canada. AT&T Canada was formed in June 1999 from the merger of AT&T Canada Long Distance, MetroNet Communications, Netcom Canada and ACC TelEnterprises. AT&T then sold off the residential longdistance portion of its operations to allow the company to concentrate its efforts on the needs of business customers. In late 2002 and early 2003, AT&T Canada announced some major changes the company went through a recapitalization/restructuring program, changed ownership, eliminated its long-term debt and emerged with plans to change its name (since AT&T decided to no longer be a major shareholder) and rebuild itself. The company has the potential to become one of the leading networking service providers in Canada; however, it still needs some work on network build-out and enhancement, and it must now prove that it can stand on its own (without the ties to AT&T Corp.). AT&T Canada currently offers a full suite of services in approximately 30 markets across Canada via a network that spans over 18,500 route kilometers of fiber. Telus was formed from the merger of BC Tel (the provincial telephone company of British Columbia) and Telus (the provincial telephone company of Alberta), with General Telephone & Electronics (GTE) (now Verizon) of the U.S. also a major investor in this group (currently holding a 22 percent interest). The major telecommunications force in Western Canada, Telus, does not yet have a complete network infrastructure in place to cover the entire Canadian market outside of its home provinces of Alberta and British Columbia; however, its development and expansion efforts are well under way. Its acquisitions of QuebecTel (and former CLEC Axxent s assets in Quebec) and of wireless service provider Clearnet, along with ongoing expansion in Quebec and other areas, continues to strengthen Telus position in the Canadian market. 14 May 2003 6
Sprint Canada (wholly owned by CallNet Enterprises, which in turn is 25 percent owned by Sprint of the U.S.) has a nationwide network and a fairly complete suite of network service offerings. Sprint Canada is currently providing service through operations in 17 locations throughout Canada. In April 2002, CallNet completed a restructuring/recapitalization plan, which lowered its long-term debt to CDN$511 million (as of the end of 2002), down from a level of CDN$2.63 billion (at the end of 2001). Some lesser competitors in the Canadian market include some of the larger cable companies, although none are posing a major threat at the present time. Additionally, the CLEC market continues to develop in Canada, although at a lesser pace than in past years. One of the major CLEC contenders at the moment is Group Telecom (operating in major markets in several provinces across Canada), although it went through bankruptcy and restructuring procedures in late 2002, emerging under the ownership of 360networks in February 2003. Group Telecom also has a nationwide fiber network (recently built, using state-of-the-art technology) serving 17 operational markets in nine provinces. Strengths Bell Nexxia was formed by Bell Canada (Canada s largest telecommunications provider) and joined together all of the provincial telephone companies across the country, with the exception of Telus, which serves Alberta and British Columbia. This gave the company a very strong operating position from its very beginning, with equally strong brand name recognition. Bell Nexxia also inherited the nationwide network of the former Stentor alliance, giving the group full access to the Canadian markets (except for Alberta and British Columbia). Efforts are well under way to build a network infrastructure in Alberta and British Columbia (originally via Bell Intrigna, which was one-third owned by Bell Canada and two-thirds owned by Manitoba Telephone Systems) to enable the group to provide true nationwide coverage. In April 2002, however, Bell Canada and MTS combined their interests in the wireline assets of Bell Nexxia in Alberta and British Columbia with Bell Intrigna to form Bell West (which is 60 percent owned by Bell Canada and 40 percent owned by MTS). Bell Nexxia has very strong financial backing from BCE and Bell Canada, along with the other provincial telephone companies that are partners in this venture. Bell Nexxia has a strong customer base from its member companies as well as from the former Stentor alliance. Limitations Newer competitors, such as AT&T Canada and Telus (at least on a nationwide basis), are likely to be more aggressive in this marketplace with regards to the services and packages which they offer, as will CLECs (such as Group Telecom). There will be some very strong price competition in the Canadian marketplace, which could make it difficult for Bell Nexxia and the other competitors to keep funding needed network build-outs and improvements. Given the current financial condition of the major providers, however, this is expected to have less of an impact on Bell Nexxia. Insight Of all the competitors in the Canadian marketplace, Bell Nexxia is probably the best positioned to serve the needs of business clients on a nationwide basis, at least at the present time. Still, the company must continue with network expansion and improvements in Alberta and British Columbia to be a full-service, nationwide provider. Marketing efforts in those two provinces must also continue to be ramped up to 14 May 2003 7
better compete with Telus. On a longer-term basis, Bell Nexxia will face intense competition from Telus (as well as from AT&T Canada, Sprint Canada, CLECs such as Group Telecom and, to some extent, from the cable companies), which should have a positive end result for business clients who will likely see more enhanced service offerings, more bundled service packages and lower costs as a result. Business clients should seek competitive bids before signing network service contracts, and they should consider signing shorter (one-year) service agreements right now and then check back in a few months to see what offerings are available from the various vendors. Clients desiring to enter into long-term contract agreements with vendors may do so, however, with expected minimal risk in signing with major vendors such as Bell Nexxia, Bell Canada and Telus. Finally, keep in mind that it is expected that Bell Nexxia will soon become a more integral part of the Bell Canada family, with the Bell Nexxia name disappearing as a brand name and as a legal entity. 14 May 2003 8