More news from north of the border - BCE tests VDSL.
Bell Canada's transformation
Due North
March 16, 2000
by Bob Beaty
While we wait for the dip buyers to rally the tech stocks -- assuming they don't stay home this time -- let's
shift our gaze to a real company, one with a product that poses a real threat to cable modems: VDSL.
What is it? Who's got it? Where do you get it?
All in good time.
First, you might have to move to Canada -- to Toronto, to be specific. That's where Bell Canada Enterprises (BCE) is testing Very high-rate Digital Subscriber Lines (VDSL). These little communication Ferraris transfer data at 25 megabytes a second. That includes television and, obviously, telephone signals.
One of my journalist buddies anointed VDSL a potential cable-killer. At 2.2 megabytes a second, the current de rigueur technology, ADSL (Asymmetric Digital Subscriber Line) runs into a location via copper telephone wire. VDSL is all fiber, magically going through something called a Digital Subscriber Line Access Multiplexer that morphs the signal, digitally, into a set-top box.
Best for new construction
While cable modems can peak faster than VDSL, the former slows down as more people in an area log on; VDSL doesn't. A drawback to VDSL, though, is that it is most appropriate in new construction, since replacing old copper telephone wires -- though possible and ongoing -- is a slow and costly process.
Bell Canada's VDSL trial in Toronto, as with US West's (USW) trials of the technology in Denver, Phoenix and Omaha, should prove the viability of the warp-speed Internet technology. Qwest (Q) is in talks to take a piece of VDSL equipment supplier Next Level (NXTV), majority owned by Motorola (MOT).
The constituents in North America and Europe -- specifically France -- are moving forward quickly with the VDSL technology. Given the global nature of technology, chances these folks will or have been chatting.
Bell Canada tends to be very aggressive and successful in setting up advantageous continental and global tech alliances. World class? You bet.
Tech powerhouse
Bell's move into this area is one of many initiatives to transform Nortel's (NT) soon-to-be ex into a tech
powerhouse on its own. The company recently announced it would pay US$1.59 billion for the No. 2 Canadian television network CTV. It's planning to distribute programming over its phone lines and through its consumer portal, Sympatico -- No. 1 in Canada -- which itself just announced a deal with Lycos
(LCOS).
Bell will pump US$45 million into the venture to make Sympatico-Lycos the premier business to consumer
stop in Canada.
Just in case the Bell moniker doesn't tip you off, Bell Canada is a massive company. Market cap of US$80
billion, No. 1 long-distance provider in Canada and some possesor of very neat subsidiaries such as e-commerce powerhouse Bell Emergis (IFM) -- touted as the star to replace Nortel in the BCE roster.
Bell Canada is a case study in how to turn a lumbering, top-heavy telephone company behemoth into a fairly lean, cutting-edge concern. Investors who have stayed for the ride have done nicely.
Worth a serious look
As Bell continues its metamorphosis, new investors who want exposure to the e-commerce, b-to-b area without having to worry about those niggling little problems that plague lesser outfits -- such as little or no earnings, concentration of products and questionable technologies -- should give the company a serious look, even at these prices.
Unlike the majority of b-to-b and b-to-c companies, there isn't a day trip between Bell's revenues at US$10
billion and its US$80 billion market cap. Earnings over the last year grew a healthy 20 percent and all divisions are ticking over nicely -- in the right businesses at, apparently, the right time.
In this age of investors wanting to be where The Next Big Thing surfaces, there is every possibility that Bell Canada will suit. Canada is becoming less of a commodity market and more of a global high-tech space.
Bell Canada may well be the best proxy to participate in that growth, especially for globally minded investors looking for a more conservative, well-financed, international player.
Bob Beaty worked in the investment industry for 20 years in Canada and the UK. Since 1995, he has been writing and producing content for some of the best financial sites on the Internet. He lives with his wife and three children on an island off the coast of British Columbia. His column, Due North, will appear every Thursday.
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