Bell CEO pushes for Internet deals
EXCLUSIVE
Jean Monty sees two scenarios: a joint venture
with U.S. phone firms or increasing its presence
in the sector with a stake in a portal site.
Wednesday, March 31, 1999
LAWRENCE SURTEES
Telecommunications Reporter; With files from reporter Mark Evans.
Bell Canada is looking to bulk up in cyberspace and is exploring potential deals that include buying
a minority stake in a U.S. portal company such as America Online Inc., Bell CEO Jean Monty
says.
Such an approach dovetails with the strategy of Bell's chief executive officer to find new sources
of growth for Canada's largest telephone company to make up for diminished growth and
plummeting profit margins in its traditional markets.
Bell's parent, BCE Inc., is flush with cash from a $5.1-billion deal announced last week to sell a
20-per-cent stake in Bell to Ameritech Corp. of Chicago. So Mr. Monty, also president and CEO
of BCE, is now poised to finance an expansion of Bell's Internet business.
"We're very interested in being the access provider to an AOL or an Excite or to all the other
portals," Mr. Monty told The Globe and Mail's editorial board yesterday. "That business is going to
be very much part and parcel of our core in the future."
BCE, the Montreal-based conglomerate, will own 80 per cent of Bell after the Ameritech deal
closes this spring. Ameritech, in turn, plans to merge with a larger U.S. phone company, SBC
Communications Inc. of San Antonio.
Bell already controls a major Canadian portal, named Sympatico.ca, which has half a million
customers -- including 200,000 in Bell's territory in Ontario and Quebec. "That's nice, we're the
biggest one in Canada, but it's not good enough," Mr. Monty said.
Industry analysts agree.
To be successful, an Internet portal operator "must have both the breadth of reaching millions of
users and offer a great depth of content," says Michele Pelino, senior analyst in the Internet market
strategy group at Yankee Group of Boston.
Mr. Monty outlined two approaches to increase the heft of Bell's Internet business. One is to either
set up a joint venture with a group of U.S. phone companies or to buy a stake in a leading portal
company.
Driving BCE's quest is the rise of portals as a digital agora -- a launch pad for electronic commerce
transactions made over the global Internet.
Portals attempt to draw Internet users -- businesses and consumers -- to a central site on the
Internet where they not only get information, but can find products and services to buy over the
Web.
"By amassing a mass audience, portals have become key bases of power in the Internet market,
and are now attracting the attention and money of global leaders in communications, commerce
and media," said a recent Yankee Group study.
Mr. Monty revealed that Bell Canada came very close to striking a deal with three U.S. local
phone companies and an unnamed technology company a few weeks ago to launch a
continent-wide portal and high-speed access service to connect customers to the Internet.
That deal would equip Bell and its U.S. partners to compete against big Internet service providers
-- including the At Home Corp. consortium offering high-speed Internet access to 330,000 cable
television customers across North America. At Home's shareholders include two of Canada's
leading cable television companies -- Rogers Communications Inc. of Toronto and Shaw
Communications Inc. of Calgary.
The cable TV companies solidified their lead over the phone companies in the enhanced Internet
service marketplace earlier this year when At Home acquired Excite Inc. for more than $7.5-billion
(U.S.). Both companies are based in Redwood City, Calif.
However, Bell's bid to strike a deal with the unnamed phone companies fell apart because the
unnamed technology company wanted too much control over the operation, Mr. Monty said. He
added that the phone companies will continue to explore that idea, noting that Bell, Ameritech and
SBC are already hooked up to 70 million homes in North America.
Mr. Monty also said Bell is exploring buying either a minority stake in a large U.S. portal, like
AOL, or a majority stake in a Canadian portal operation.
Yankee Group analysts believe that acquisitions of portal companies within the commerce services
market will be rampant this year.
However, Mr. Monty quipped that BCE can't afford to "go buy AOL, they could buy us."
But Mr. Monty affirmed that he doesn't want to dump Bell's Sympatico, adding his preference is
to strengthen Sympatico and link it to a bigger U.S.-based portal company -- like AOL -- combined
with a venture with the U.S. phone companies.
That approach was echoed by Andrew Scoular, president and CEO of MediaLinx Interactive LP,
the Toronto-based arm of Bell that owns Sympatico.ca.
Mr. Scoular's vision, outlined in a recent interview, is to forge a partnership with a portal company
within the next six months to boost Sympatico's content, then rebrand the service and take it public
within two years.
Bell expects Internet access sale to AOL Canada
High-speed connection deal would give phone giant its first
service provider customer, help it meet expansion targets
Wednesday, March 31, 1999
MARK EVANS
Technology Reporter
AOL Canada Services Inc. is poised to break ranks and become the first Internet service provider
(ISP) to purchase high-speed access from BCE Inc.'s Bell Canada unit.
Jean Monty, president and chief executive officer with Montreal-based BCE Inc., said yesterday
that Bell expects to sign an agreement with AOL Canada within a few weeks. AOL Canada will
pay about $25 a month per user to access Bell's one-meg modem service.
Mr. Monty said wholesale agreements with ISPs such as AOL Canada are a key part of Bell's plan
to have 80,000 high-speed customers by year-end, compared with 10,000 now.
The expected deal with AOL comes after more than six months of haggling between Bell and many
ISPs over high-speed access. The ISPs have wanted to purchase the service from Bell but balked
at paying a wholesale price that's higher than the $39.95 retail price offered by Bell's Sympatico
ISP unit.
Bell sweetened the pot earlier this month by offering its one-meg service to ISPs at a wholesale
price of $24.95 a month. The ISPs, however, complained the cost was still too high because it
didn't take into account their additional administrative and marketing expenses.
Instead, several ISPs suggested that a cost of $15 a month would allow them to offer high-speed
access at the same price as Sympatico and make a profit.
Jim Carroll, an Internet consultant and co-author of 1999 Canadian Internet Handbook, said AOL
Canada's willingness to jump on the high-speed wagon is simply a matter of "competitive
necessity."
"Whether it's cable or one-meg modems, it's fast and anybody who sees either of these services
and then looks at AOL or any other dial-up ISP, there's no comparison," he said.
Bell's motivation to bring the ISPs on board has been heightened by the rapid gains made in the
high-speed Internet market by cable companies such as Rogers Communications Inc. of Toronto
and Shaw Communications Inc. of Calgary. The cable companies' At Home service has about
150,000 subscribers who pay $39.95 a month.
Mr. Monty said Bell needs to expand the distribution of its high-speed service to compete with At
Home, and Bell sees the ISPs as one way of achieving this goal. However, he said Bell has the
marketing clout to go it alone if the ISPs do not want to participate.
"We can help them and they can help us," he said. "If they are indifferent, we will push retail
[business] rather than wholesale."
AOL Canada, which refused to comment, is Canada's third-largest ISP with about 130,000
subscribers. The Toronto-based company is a unit of Dulles, Va.-based America Online Inc.
America Online signed a deal with San Antonio-based SBC Communications Inc. this month to
offer high-speed access to AOL members in seven U.S. states. AOL expects to charge $20 (U.S.)
a month for the service, in addition to its monthly access fee of $21.95.
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