Telecommunication service in Northern Ontario

Now that the Ontera sale to Bell Aliant is final and we have no chance of reversing that decision, it will be important to document how well the sale meets the following priorities as stated in the MNDM April 4, 2014 media release.

• Through the competitive process, Bell Aliant demonstrated they can meet provincial priorities to sustain jobs, deliver telecommunications services, invest in the business in northern Ontario and provide value for taxpayers.

One of most important factors which is tied into the priority listed last, is the cost to the government.  Ontera operated in a marginally profitable region, and in many communities where the private sector did not want to go.  Once the industry was deregulated in 2001 and Northerners were able to access competitive long-distance rates, Ontera's revenue was severely impacted and a new source of revenue had to be developed.

The government of the day hired KPMG to evaluate the alternatives and there were three alternatives developed.

1. Retention with improvements
2. Divestiture to large operator except Bell (because it would eliminate                   competition)
3. Sell to local interests

The recommendation was to further explore the option to divest O.N.Tel, and while that was pursued to its end, no company was interested in the purchase due to the presence of Bell in a marginal market.

That fact was reflected by this comment in the ONTC 2003 Annual Report

By default, the government had to accept Option 1 and started to utilize ON Tel as a government supplier.  The same Annual Report also noted this:

Telus was brought in as a strategic partner in 2004 as a magic bullet from the private sector.  The financial year end was extended to March and this excerpt reflects the continuation of government utilization of Ontera.

In 2006, management at ONTC terminated the agreement with Telus, ostensibly because Telus had strengthened the brand so they were not needed anymore....in reality, revenue had not increased, but expenses to Telus had.

The dependence of government services on Ontera continued;

In 2007-08 Ontera continued to be the provider of choice for government services in their region

It appears that by 2009 the government had stopped trying to utilize Ontera in their operations, although revenue continued to climb until 2011 then started to decline as the uncertainty about the corporation hit again. 

Then, in their wisdom, MNDM decided to sell the corporation with Ontera being the first up in the divestment. 

It appears the only large company operating in the region was also the only one interested in taking the assets off of their hands.  Bell....the company that had been excluded in the original attempt because of the effect on competition. 

 Except that this time, MNDM did not care about service, they desperately wanted to get rid of the division because it could not make money and in a regulated market it had.  Trying to turn around a division from the regulated market that Ontera had operated in, to the deregulated and competitive market that had been created by the internet was a huge and daunting task.  

So huge that even a partnership with Telus was unable to deliver.  In such an environment, and after a few years of hindsight, MNDM should have recognized that the partisan board they had appointed was incapable of ramrodding the changes necessary.  In her report, the Auditor General reported that Deloitte had informed the Ministry in 2006 that the governance structure of Ontera was unwieldy and may hamper Ontera's ability to respond.  

One would expect the immediate reaction would be to install someone on the Board with expertise who could both oversee the division and report to the Ministry about the risks.  But....no....there was no one ever appointed to the ONTC Commission who had experience in either Telecommunications, or Railroading....from their resumes, it appeared to be just those who may have expressed an allegiance to the Liberal party.

So now we wait...and watch...to see how Bell Aliant provides the services to the region that MNDM determined they were better suited to do.  The fact that the federal Competition Bureau thought that some token effort should be made toward Eastlink will be lost over time.  Who knows what Eastlink is prepared to offer or will remember they were given the opportunity?

No...it is the huge number of public organizations that were serviced by Ontera that will have to cough up whatever Bell decides in the future....we will never know....except our individual services will be measurable, and I stand ready to compare mine over time.