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Bell Canada hits new heights in stupidity

30 Mar

As expected, Netflix’s move on Monday night to introduce lower-quality video streaming for us Flinstones-era Canadians got a lot of media attention outside of Canada. But, with Americans being Americans, much of the coverage seemed worried about their own skins – as in, with restrictive internet usage caps being the norm here, are they going to migrate south and will Netflix have to enact similar measures there?

A few weeks ago, I spoke with an official at the Organization for Economic Co-operation and Development in Paris about the global trends regarding internet caps. He said, in unequivocal terms, that the general worldwide trend was toward larger and larger caps, not smaller ones like we’re seeing here in Canada and like the ones pundits in the U.S. are worried about. I’ve talked about this before – how North America’s bucking of the trend has everything to do with the fact that our governments take a largely hands-off approach to managing their internet markets. There are many people convinced that’s the wrong approach to take in such an important field – myself included – but it looks like it’s a lesson we’re going to have to learn the hard way.

In any event, I had a sit-down with Netflix CEO Reed Hastings yesterday, wherein we chatted about the new quality settings, acquiring new content, usage-based billing and lobbying. The full Q&A is up on CBC.ca, so check it out if you’re interested.

Today’s post hits on a related issue. A few weeks back when I wrote about the myths surrounding usage-based billing, a chap calling himself “Investor’s Perspective” stirred up the comments section by supporting Bell’s desire to make more money. The fellow posted anonymously but claimed to be an investment manager who helped oversee billions of investors’ money. Whether he was who he said he was, he made some comments about how big telecom companies are not good investments because they usually don’t see good returns on the amount of capital they sink into their businesses.

Having covered the industry from the investors’ perspective for a number of years, I can’t say I agree with him. While companies such as Bell have not seen much movement in their stock prices for years, they have generally been pretty steady sources of dividends. Both of those phenomena can be explained by the same factor – they’re poorly run companies that make steady money because they enjoy dominant positions in uncompetitive markets. In other words, while the money continues to steadily roll in, there really isn’t much hope for growth, which is why the stock never goes anywhere. As such, while you can’t really get rich from investing in a company like Bell, it certainly won’t hurt your portfolio either.

It’s worth noting that some cable companies, such as Rogers, have historically performed quite differently. Ten years ago, Rogers stock was around $11 a share. Today, it’s more than triple that. Rogers took a pounding back then because it spent and spent on necessary infrastructure, both cable and wireless. Over the next decade, it reaped the rewards and came to dominate Bell and other competitors in almost every area because of that. Investors who stuck with some of these cable companies love them because they did, in fact, make them rich. It’s a classic case of high-risk, high-reward.

There’s a reason for the difference in performance. While Ted Rogers cut a lot of throats in building his empire, all on the back of his own cable monopoly, at the end of the day he was a fiercely competitive entrepreneur. Most big phone companies in the world, on the other hand, were at one point in time government-own monopolies before they eventually spun off into publicly owned entities. And as we all know, nothing is fatter and lazier than a government-owned monopoly.

Those early attitudes are still somewhat present and still drive both types of companies today. Telecommunications markets across Canada and in some other parts of the world have for the past few decades been dominated by the more nimble and hungry cable companies, with the sluggish phone companies doing all they can to avoid being left in the dust.

The reason for Bell’s sluggish stock performance is therefore not some innate nature of the business it is in, it’s because the company is – simply put – poorly run, to the point of being stupidly run.

Need proof? Okay, how about this. The Canadian public is now on high alert about the state of internet access in this country. Nearly half a million people signed a petition that on the surface is against usage-based billing, but which is really an indictment of the larger situation. The government is ticked off and breathing down Bell’s neck. This is, by the way, a relatively right-wing government that strongly advocates letting market forces do their thing. Yet still, the Prime Minister himself is ready to meddle with those forces. Moreover, the whole UBB fiasco has made Canadians more aware than ever that there are other, cheaper options out there as far as internet service providers are concerned. Many Canadians hadn’t even heard of Teksavvy before this mess came along.

So what would be the stupidest thing Bell could do in this situation? What would piss people – especially customers – off even more and drive them to those smaller competitors, as well attract even more attention from politicians of all stripes? Hmm… how about raising prices? Yup, that would be about the dumbest thing the company could do. There’s no way they’d do that, right?

Wrong. That’s exactly what Bell is doing. Effective as of May, all of Bell’s retail internet services are going up by $3. Wow. Just wow.

There are two possible explanations for why Bell would make such a move, which is seemingly daring the government – whoever that may be at the conclusion of our pending election – to give it a good, old-fashioned spanking. One is that the company’s bean counters figured that its revised usage-based-billing proposal will result in less revenue, which are dollars that need to be made up elsewhere. The other possibility is that one hand – the side of the company that sets prices – doesn’t know what the other hand, namely the regulatory people dealing with the UBB fracas, is doing. At this point, I’d lay 50-50 odds on either being the answer. Neither is smart.

I hate to keep bringing up New Zealand but I swear this is like watching a rerun. The big phone company there kept making similarly moronic moves like these until the public and the government just couldn’t take it anymore. The company, Telecom New Zealand, was subsequently forcibly broken up into three pieces, thereby losing more than half its stock value. For the longest time, I haven’t thought that could happen here, but perhaps I’ve been underestimating just how stupid some companies can be.

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20 Comments

Posted by on March 30, 2011 in government, internet, telecommunications

 

20 responses to “Bell Canada hits new heights in stupidity

  1. Guillaume

    March 30, 2011 at 8:33 am

    Hello,

    another example of pure stupidity by Bell was when the CRTC gave the ‘final’ decision on UBB, which tied the prices to retail for GAS, without discount. Bell announced the rate increase in max overcharges (from 30 $ to 60$) 2 days after the CRTC announcement.

     
  2. Parallax Abstraction

    March 30, 2011 at 10:41 am

    Fantastic article as always man. I agree with you that Bell is a terribly run company (you should hear some of the stories my boss tells from when he used to work there) but when it comes to price increases, that is one of the most considered things any large company does. I guarantee you that $3 price increase has dozens–if not hundreds–of hours of meetings behind it. The main reason I’ll bet they chose to do it is because it’s not a big enough increase for most sheep consumers to notice and that by and large, they’ll get away with it and lose a minimal number of clients because people can’t be bothered to go through the minimal hassle of changing ISPs. And you know what? I think they’re right.

    My girlfriend’s parents have been on Bell for DSL and TV for years. They get terrible speeds at their house and I’ve tried to get them to switch but they won’t do it. We had dinner there and I told him about UBB and about the increase in prices–which he agrees are both a ripoff–and he *still* won’t switch. His reasoning? I kid you not, because Bell includes dial-up access which they can use at their cottage. Disregarding the fact that my girlfriend says they use that dial-up maybe twice a year, this is in spite of the fact that he can add dial-up access to a TekSavvy account for $7 a month which is far outweighed by how much he’d save by using them over Bell.

    The unfortunate fact is that right now, people just don’t care about spending more money for less service if they have to endure even the slightest inconvenience to change. As a population, we’re lazy and conformist and companies like Bell know this fact and exploit it.

     
    • GHok

      March 31, 2011 at 1:12 pm

      Changing is also a huge hassle. The last time (over 5 years ago now) I moved and signed up with Bell, it took one month, countless hours on the phone, maybe 4 tech support guys coming to my house, and a whole bunch of lies, before I had the internet working correctly. I used Bell for years because all my life, I’ve used either Bell or Rogers, and they’ve both always sucked. I never knew I had better options for the internet. I knew they existed, but I figured they’d be the same crappy service. I was kicking myself when I switched for not doing so sooner.

      Rogers and Bell, if they were actually well liked, wouldn’t be facing so much opposition to this.

       
  3. Nick

    March 30, 2011 at 11:12 am

    I wouldn’t mind Bell being broken up, BT-style.

     
    • Parallax Abstraction

      March 30, 2011 at 11:15 am

      I would love to see that happen too but North America is run by corporations now. No government (aside from maybe the NDP and even that’s a long shot, not that they’ll ever get elected anyway) would be willing to go that route anymore. I think it needs to happen but it won’t with any of the governments we can end up with.

       
  4. Sergei

    March 30, 2011 at 11:34 am

    Can’t wait for Bell and even Rogers to broken up. Especially different divisions of those companies so that there is not such thing as bundling. I don’t think this will EVER happen in Canada. Never ever people here are not ready and will never be ready for this, since majority of people still don’t care!

     
  5. nurleymon

    March 30, 2011 at 3:29 pm

    “Bell Canada hits new heights in stupidity”…
    Thank you. These are important subjects.
    (take a writing class, please)

     
    • Aizou

      March 30, 2011 at 3:47 pm

      @nurleymon

      Seriously?

      The man writes about a subject that will affect all Internet users’ bottoms lines (translation:their WALLETS) and all you gripe about is that you want him to take a writing class?

      For what, exactly?

      Was there a spelling mistake? A grammatical error?

      Dude.

      There are FAR more important things at hand right now. Far more important than YOUR petty grammar concerns.

      duh. iz wannaz spell tings dis way frum now on, y’hear?

       
      • Vince

        March 31, 2011 at 5:52 pm

        You’ve made my day!!! :))

         
  6. Baboo

    March 30, 2011 at 5:23 pm

    Good read, the thing about telco reforms are that:

    a) we have a minority government and no party wants put telcos on the slaughter while the other sides can just complaint about these “job-killing” maneuvers(breaking up the telcos to their last mile component takes ALOT of political will power – look at WIND mobile for details)

    b) while some Canadians are angry, most just keep giving Bell et al their money for bad services, it tells us how naive most Canadians are (or the lack of options there is in Canada), and this translate directly into how politicians act, ignorance until Bell actually dare to force their competitors to follow their business model, which the CRTC is STILL ignorant in making a decision for consumers

    c) frankly, all the rhetorics in the election is not directed at telco reforms, its about attack, attack, and attack. Look at the liberals and the conservatives in this. This just shows how divided the country is in certain issues or even in party lines. Telcos are just sitting by paying their contributions, and get their share of the pie by having these monopolistic (like UBB) decisions passed by the CRTC while the public is distracted. Unless Canadians, even Quebecors, agrees and determine to go with telco reforms, we won’t get anything anytime soon. Until then, we can all move to Saskatchewan for Sasktel. Curious how a crowd corporation is better than the telcos in having unlimited internet.

     
  7. katie

    March 30, 2011 at 7:38 pm

    This is an interesting post for all of you with bell them raising their prices is breaking a contract they made with you. You can now cancel your service without penalty. See link ->

    http://www.facebook.com/notes/al-mcgale/how-to-quit-rogers-tv-internet-and-home-phone-now/10150406464705398

     
    • Chris

      March 30, 2011 at 10:37 pm

      BRAVO, katie! The only language Bell understand for using is so well is threats and intimidation. I’ve been saying this forever: just switch to an independent ISP, you don’t have to be with Bell because it finally offered the high speed internet you’ve been waiting for for the last decade.

      And of course, it’s exactly the same situation with Bell’s telephone service, its Satellite TV service and, of course, its cell phone service.

      It’s unbelievable how obedient and trusting the average consumer is. No wonder Bell got to become the fat wolf it is now, we’ve given him the sheep to tend.

       
  8. katie

    March 30, 2011 at 7:39 pm

    The part you should be interested in is

    “”Ontario’s Consumer Protection Act. In addition to s15 in the Rogers contract our rights are further supported and clearly defined by CPA 42.(2).2 within the Amendment, rene…wal or extension in accordance with consumer agreement;

    2. The agreement gives the consumer at least one of the following alternatives to accepting the supplier’s proposal to amend, renew or extend:

    i. terminating the agreement, or
    ii. retaining the existing agreement unchanged.

    The above is only valid in Ontario, but there is likely something similar in other provinces too.””

     
  9. ZennReiki

    March 30, 2011 at 8:55 pm

    If i may i will tell you a personal Bell story. My wife (before we meet) worked for Bell for 13 in in Toronto. Sh had a management job. They spent $8,000 to move plus a $2000 allowance. 6 weeks after the move they told her her job would be no more due to restructing. Now that management 101 lol Peace

     
  10. Pennywill

    March 31, 2011 at 7:53 am

    I remember when the postal service was loosing business to couriers and their solution was to raise stamp prices???? Perhaps it’s a corporate mentality.
    “We need more money, so let’s charge more, regardless of the reality of the situation.”

     
  11. Teni

    March 31, 2011 at 9:22 am

    Well, Bell already raised the cost of my “unlimited” grandfathered internet to 64.90 per month. If I were to translate this into a true UBB or usage model and they were to, for example, charge me $15.00 per month for a subscription/line fee, and then charge me per gigabyte on their current “insurance plan” rate of 12.5 cents per gigabyte, I’d have to transfer 399GB per month to reach my current monthly subscription rate. Laughable.

    I don’t think I’ve ever transferred anywhere near this rate even when downloading various Linux distributions during my I.T. learning endeavors.

    This whole UBB thing has served to explain that they (Bell) are more than happy to force Canadians into a punitive price model that has nothing to do with “fairness”. I still have not seen Bell nor the CRTC make any valid explanation of how UBB helps this “fairness” paradigm they are now preaching. Michael Geist has already de-bunked this as simply being a regulated money-grab. Mirko Bibic has even come out and said that there is no congestion on the last mile. Additionally there is no benefit to those “nice” internet users who use less data. People who use less data don’t get any pricing reduction via this punitive “metered” UBB scheme. Sad.

    What’s funny is that Arstechnica.com has already provided analyses explaining that Bell’s congestion went up when they added throttling and ITMP practices two to three years ago. Funny that. This also degrades the quality of the connection AND causes billed internet usage to be over-inflated in the reporting/recording process. I have seen at times during various on-line gaming sessions that the quality of my play has been diminished because of various packet dropping and throttling schemes. Thanks Bell.

    I would like to see the ADSL-CO proposal of two or three years ago come into play, where “unbundling” of Bell’s and others’ internet services can happen and a third-party provider like TekSavvy or Acanac can take over the whole connection from my house to the internet exchanges.

    Bell’s latest “AVP” submission to the CRTC shows Bell’s egregious level of arrogance, and I hope that whatever UBB scheme they propose gets shot down, deservedly so.

    I agree with the writer that Bell’s stupidity has risen to new heights and it’s obvious they are just trying to gouge people with punitive pricing and exceptionally low data caps.

     
  12. Tibor Martinek

    April 1, 2011 at 2:22 am

    My UBB, which i had it since I subscribed to HSI went up again by $5.00/month as of March 1, 2011 to freaking $69.95. The increase is 8.2% annualized. Highway robbery! Bell should get a good kick in their asses for simply “stealing” money from the Canadians.I hope that the politicians realize how important is reasonably and competitively (in comparison to our southern neighbour) priced access to internet by individuals and business and force IS and data service providers like Bell, Rogers, Telus, Shaw to roll beck any unreasonable increases to he Canadian consumers. If we don;t make a noise to a high decibel level, the politicians might pretend that they don’t hear us.

     
    • Chris

      April 1, 2011 at 10:06 am

      I know it may sound like a broken record, but why don’t you SWITCH?

      I live in an area where we have little to no choice for telecommunications (basically none for cell phone service – with the competitor my home location is outside of the provider’s local zone!!!) and the first thing I did when we were told we could get high speed internet through bell is to see whether it was available from an independent ISP.

      So few people know there are alternatives and that they don’t have to blindly accept to be bullied by these thieves, it’s a real tragedy!

      So,

       
      • petenowak2000

        April 1, 2011 at 1:14 pm

        Well, as someone mentioned above, switching is not exactly easy. I used to be a very happy Teksavvy customer until I moved. The tech guys there said I’d have some down time while they made the switchover, but they couldn’t guarantee how long it would be because it’s entirely dependent on Bell. It could have been days or weeks. As much as I wanted to keep my business with Teksavvy, I couldn’t take that risk so I switched to Rogers. I’ve been pretty happy so far but as soon as that inevitable rate hike comes, I’ll probably test the waters again.

         
  13. Ryan

    April 2, 2011 at 5:23 pm

    Shaw raised internet rates $2 while lowering caps. Extreme went from 125GB a month to 100GB per month. Not just download traffic upload traffic counts towards that 100GB cap.

    Pay more for less, yes Shaw is sure listening to customers. Ask how much their lard a$$ CEO that quit get’s for a monthly pension. Go get the money from him. Shaw rolls out a useless “build your package” it’s frankly a joke. We need real competition.

     
 
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