Canadas Stentor Telco Alliance Crumbles


Ottawa -- Stentor -- for years the most feared enemy of the
Canadian cable-TV industry -- has collapsed, as members of the alliance of Canadian local
telcos found that they couldn't grow without competing against each other.

Stentor members Bell Canada, which serves the provinces of
Ontario and Quebec; BC Telecom Inc., which serves British Columbia; and Alberta telco
Telus Corp. planned to deploy nationwide fiber optic networks.

However, by expanding outside of their service areas, the
companies would have been competing head to-head with overlapping services, violating an
unwritten cornerstone of Stentor. BC Tel and Telus are in the process of merging, and they
would have launched their fiber optic network under one banner.

Since its inception in 1992, Stentor has acted as a
national lobbying, product-development and marketing agency for Canada's local
telcos. It enabled them to present a united front for everything from regulatory hearings
to service launches.

The demise of Stentor comes at an opportune time for
Canada's cable industry, which is facing delays in digital cable rollouts and
increased competition from direct-to-home and wireless cable.

Harris Boyd, vice president of industry affairs at the
Canadian Cable Television Association, appeared pleased about the breakup.

"It's good to see increased competition for
Bell," he said.

Theoretically, the Stentor alliance could have survived,
since its agreements emphasize voice traffic, rather than data. But the September decision
by its 11 member telcos to handle their own product development, marketing and government
relations, rather than leaving them in Stentor's hands, effectively killed the

About 1,000 of Stentor's 1,800 employees will be
"transferred" back to the alliance companies from which they were drawn, Stentor
said in a news release.

There were other factors behind Stentor's demise.
"The telecom industry has changed remarkably since Stentor was founded," said
Liz Angus, executive vice president of Toronto-based consultant Angus Telemanagement.

Back then, Stentor's aim was to give Canada's
local telephone companies "a common face across the country," she said.

However, "None of those phone companies gave up its
individual face to the customers," Angus added, undercutting the reason for
Stentor's existence. The alliance was so obscure that Canadian news reporters often
had to explain what Stentor was to readers and viewers.

Stentor was also doomed due to the ambitions of its
members, which learned through experience that cable TV isn't the cash cow that they
once thought it was. Now, "every single phone company in the alliance" is
looking for other ways to answer the question, "How are we going to grow
bigger?" Angus said.

The explosive growth of the Internet provided the obvious
answer: data traffic. To capitalize on this market, Stentor needed to launch a national
high-speed-data service via dedicated fiber optic networks.

But it soon became apparent that "Bell wanted to run
it, and Telus wanted to run it, and you can't both do the same thing in the same
organization," Angus said.

Bell Canada is trumpeting its planned fiber optic network,
known as Natco, which the company said "will provide Bell's national customers
with seamless, end-to-end communications services." Meanwhile, in a full-page ad in
the Oct. 27 edition of national newspaper Globe and Mail, BC Tel and Telus
announced the arrival of "an innovative, growth-oriented major competitor -- not just
in British Columbia and Alberta, but all across our country."