CANADIAN LOCAL TELECOM SERVICES MARKET REPORT

2001 EDITION

NBI/Michael Sone Associates
193 Church Street
Toronto, Ontario
M5B 1Y7
Telephone (416) 360-0424
Facsimile (416) 360-7546
e-mail msone@nbicanada.com

March 2001

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Table Of Contents

Section	Page

About This Report	iv

1.0 Introduction	1
2.0 A Definition of Local Services	4
3.0 The Local Services Market Sized	7
3.1 Clarification and Definition	7
3.2 Overview	8
3.3 ILEC and CLEC Specifics	9
3.4 Growth Forecast	10
4.0 The Regulatory Environment	18
4.1 Tracking the CRTC's Activities	19
4.1.1 CRTC activity related to telecommunications objectives	20
4.1.2 CRTC activity related to convergence objectives	34
4.2 Public Notices	41
5.0 The Options and Economics of Competitive Local Services	44
5.1 Resale	44
5.2 Unbundled Local Loops	45
5.3 Wireless	47
5.3.1 Fixed Wireless	48
5.3.2 Point-to-point Wireless	50
5.4 Hybrid Fibre Coax (HFC)	51
5.5 Internet Protocol (IP) Telephony	52
5.6 DSL	52
5.7 The Investment	54
6.0 Marketing Local Services in a Competitive Environment	56
6.1 Industry Evolution	56
6.2 Products	60
6.3 Pricing	61
6.4 Service Level Agreements	62
6.5 Bundling	63
6.6 Challenges	67
7.0 Corporate Profiles	69
7.1. Bell Canada and its Extended Family	70
7.1.1 Bell Canada	74
7.1.2 Aliant	84
7.1.3 Bell Intrigna	90
7.1.4 MTS	93
7.1.5 SaskTel	100
7.2 TELUS: The ILEC and the CLEC	104
7.2.1 TELUS - The ILEC	108
7.2.2 TELUS - The CLEC	115
7.2.3 TELUS- Qu?ecTel	117
7.3 The Competitive Local Carriers
7.3.1 AT&T Canada	119
7.3.2 Axxent	125
7.3.3 Cannect Communications	129
7.3.4 Cogeco Communications	133
7.3.5 Combined Telecom Inc. (CTI)	136
7.3.6 EastLink	139
7.3.7 Futureway Communications	142
7.3.8 GT Group Telecom Services	145
7.3.9 Gateway Telephone	149
7.3.10 Maskatel	152
7.3.11 Norigen	154
7.3.12 PRIMUS	157
7.3.13 Regional Cablesystems	159
7.3.14 Rhythms	161
7.3.15 RSLCOM Canada	164
7.3.16 Sprint Canada	167
7.3.16 Stream	170
7.3.18 Telephone Company (VTC Canada)	173
7.3.19 Vid?tron Communications	175
7.3.20 XO Communications	180
7.4 The Building-Centric Local Exchange Carriers	185
7.4.1 Davnet	186
7.4.2 Everest	189
7.4.3 OnSite Access Canada	192
7.4.4 Quartet	195
7.4.5 Shared Technologies	198

LIST OF EXHIBITS

Exhibits	Page
1 Local Access Lines by Province (as of December 31, 2000)	12
2 Local Access Lines by City (CMA) (as of December 31, 2000)	12
3 ILEC Local Access Lines (1999 - 2004)	13
4 Lines Serving ILEC Customers (1999 - 2004)	13
5 Total ILEC Local Services Revenue (1999 - 2004)	13
6 CLEC Share of Total Local Access Lines (1999 - 2004)	14
7 CLEC Share of Total Local Services Revenue (1999 - 2004)	14
8 Summary of CLEC Lines and Revenue (1999 - 2001)	15
9 Line Share for ILECs and CLECs by Residential & Business Segments (1999 - 2004)	16
10 Revenue Share for ILECs and CLECs by Residential & Business Segments (1999 - 2004)	16
11 Summary of DSL Lines, (1999-2001)	17
12 The Reach of the Bell Canada Family	70
13 The BCE Empire - Where Growth is Occurring	73
14 Bell Canada's Bundles	80
15 Bell Canada Results and Forecast (1999 - 2001)	82
16 Bell Canada Optional Feature Penetration (1999 - 2001)	83
17 Aliant Results and Forecast (1999 - 2001)	88
18 Aliant Optional Feature Penetration (1999 - 2001)	89
19 MTS Results and Forecast (1999 - 2001)	98
20 MTS Optional Feature Penetration (1999 - 2001)	99
21 SaskTel Results and Forecast (1999 - 2001)	102
22 SaskTel Optional Feature Penetration (1999 - 2001)	103
23 TELUS (ILEC) Business and Residential Bundles	111
24 TELUS (ILEC) Results and Forecast (1999 - 2001)	113
25 TELUS (ILEC) Optional Feature Penetration (1999 - 2001)	114
26 AT&T Canada Results and Forecast (1999 - 2001)	124

About This Report

At approximately 200 pages, this is NBI/Michael Sone Associates' second report on the Canadian Local Telecom Services Market. The extensive primary research that is the hallmark of all NBI/Michael Sone Associates' reports was carried out over the past several months as the local services market has undergone many changes. Information, both quantitative and qualitative, was analyzed and organized so as to provide the reader with a detailed understanding of the background, current state and probable future of the local services sector. The final product, Canadian Local Telecom Services Market Report, 2001 Edition, is the most detailed research report available on this industry.

The local services market will experience a myriad of developments over the coming months that NBI/Michael Sone Associates will continue to track.

Following an introduction and definition of local services in Sections 1 and 2, NBI/Michael Sone Associates provides detailed quantitative data in Section 3 that measures the size of the market, the growth for incumbents and new entrants in both the business and residential sectors over a six-year period, and forecasts the share of the market by lines and revenues to be held by the various participants.

Section 4 discusses the regulatory issues germane to the industry while Section 5 looks at the options and economics of competitive local services, examining the various technologies used in its provisioning.

Section 6 outlines the relevant marketing concerns including product, pricing, customer service and bundling, and examines the role that each plays in local competition and in the broader telecom industry.

Section 7 presents the all-important Corporate Profiles that provide a wealth of qualitative and quantitative information about the companies that are already participants in the local services market as well as those who are at various stages of planning their entry.

Corporate Profiles are divided into three groups, each having unique characteristics. The first includes the five major ILECs, the second group portrays the competitive local carriers and the third examines the building-centric competitors.

The report is supported by 26 comprehensive Exhibits that examine line counts, revenues, business and residential analysis, bundling, optional feature penetration, provincial and city-specific data, pricing and corporate relationships.

A Note on Accuracy

A Note on Accuracy

The accuracy of the information in this report cannot be guaranteed. The information is the most recent available at the time of writing, but is subject to change. Information on specific companies should not be construed as official statements from those companies. Rather, such information represents the opinions of NBI/Michael Sone Associates. All figures, unless otherwise indicated, are NBI/Michael Sone Associates estimates. Where an error has occurred, NBI/Michael Sone Associates will be pleased to publish any demonstrably more accurate information that is supplied to us. While NBI/Michael Sone Associates has endeavoured to provide the most up-to-date information possible, given the ever-changing nature of this sector, certain sections may have been written prior to key events having taken place.

As always, NBI/Michael Sone Associates welcomes comments on this report and suggestions for future editions. Please call us anytime at (416) 360-0424.

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