Carol Stephenson, President, Stentor Resource Centre Inc.
THE NEED FOR COMPETITIVE EQUITY IN THE CANADIAN TELECOMMUNICATIONS INDUSTRY
Chairman: Julie Hannaford, President, The Empire Club of Canada
Head Table Guests
Ed Badovinac, Professor of Telecommunications, George Brown College and a Director, The Empire Club of Canada; Pasha Peroff, OAC student, Lawrence Park Collegiate; The Rev. Dr. John Gladstone, Minister Emeritus, Yorkminster Park Baptist Church; Lis Angus, President, Angus Telemanagement; Deidre McMurdy, Business Editor, Canada AM and CTV; Yves Desjardins, Sicilianio, Vice-President, Corporation Positioning and Development, Bell Mobility; Raymond Protti, President and CEO, Canadian Bankers' Association; Marcia McClung, President, Applause Communications Inc. and a Director, The Empire Club of Canada; Patrick Daly, Executive Director, Canadian Business Telecommunications Alliance; Fred Williamson, Vice-President, Marketing, Mackeral Interactive Multimedia Inc.; Jim Chestnutt, Vice-President, Eaton's School of Retailing; and Josee Goulet, Vice-President, Product Development, Bell Canada.
Introduction by Julie Hannaford
This meeting of The Empire Club of Canada is the last meeting of 1996, which will close with The Empire Club's Annual Christmas Luncheon, at which time The Empire Club of Canada celebrates the end of the year and looks forward to the upcoming year 1997. This meeting is also the fourth in the series of addresses on telecommunications, which began with an address by Bill Catucci from AT and T, and was followed by an address from David Parkes of Sprint Canada and Charles Sirois of Teleglobe Inc. The organising theme for the series of addresses as we all know was "Competition--Who Needs It?" In some ways, the question was a focus for the targeting of the alliance represented by our guest today. As many of you know, Stentor is the alliance of provincial telephone companies which until recently governed the delivery of our telecommunications services in Canada. The advent of competition in telecommunications has brought with it a heightened focus on the telecommunications alliance, Stentor, represented by our guest today. For those of you who have been at the telecommunications meetings that preceded today's meeting, you will know that Stentor has become, in a way, the stalking horse for telecommunications talk in Canada as we move into an increasingly heightened competitive environment.
If we look at what all our speakers have been saying about competition today, what we have learned is that competition has a deeper meaning than a simple race for market share. What we learn further is that if we fail to recognise that competition means more than winning domestic market share, we shall be eclipsed by market forces that will make losers out of market share winners. What each of our speakers in the telecommunications series has pointed out, from Bill Catucci, to David Parkes, to Charles Sirois is that the competitive challenge exists beyond our national borders, and indeed beyond our international borders. The face of competition at the millennium will be a global face and our thinking in regard to that competition must be global, not local.
Thus, our speakers in the telecommunications series have spoken as much about alliances, as they have spoken about their competitors. If we needed a graphic illustration of the importance of alliances, we had that last week when Charles Sirois noted that Juri Koor, the President of Callnet, and one of Teleglobe's fiercest competitors, also participates in an alliance with Teleglobe through one of its subsidiaries for the purposes of consolidating certain aspects of market share.
At the risk then of introducing further buzz words into an industry already replete with buzz words like convergence and consolidation, it is clear that one of the sub-texts of every discussion on telecommunications relates to "strategic alliances."
If strategic alliances constitute the critical path to competition in a global telecommunications environment, then the history of Stentor is much more than a discussion of the virtues and vices of monopoly. Stentor, as an alliance of Canadian provincial telephone companies which has been operating in Canada in one form or another since the inception of telephone service, provides us with a means of understanding the virtues and vices and the challenges associated with a strategic alliance growing through the rapid developments and changes in the telecommunications industry. The operation of Stentor as an alliance of telephone companies, some large, and some small, may well be the best study piece for how to manage a strategic alliance. Our guest, having worked with, and through such strategic alliance is eminently qualified to educate us in this regard. Carol Stephenson has been in the telecommunications business for almost a quarter of a century. After graduating from the University of Toronto, Ms. Stephenson held a number of management positions with Bell Canada, before she was appointed General Manager of Operator Services for the Bell Ontario Region in 1988. In 1991, Ms. Stephenson assumed the position of Assistant Vice-President of Rates and Policy for Bell Canada, and then in 1992 she was appointed Vice-President of Logistics for Bell Canada. Our guest joined the Stentor Resource Centre in 1993 as Group Vice-President of Rates, Regulatory Matters and Strategic Planning. Ms. Stephenson was appointed President and Chief Executive Officer of the Stentor Resource Centre on July 1, 1995. In the same year she was an Adjudicator for the 1995 Financial Post/Arthur Andersen 50 Best Managed Private companies. She has served on the Board of Directors of the London Regional Children's Museum with the London Women's Network, and has worked as Corporate Campaign Manager for the United Way. She is Vice-Chair of the Board of Directors of the Information Technology Association of Canada, and a member of the Planning Forum of Ottawa and Canadian Women in Communications. In the same year that our guest was appointed Chief Executive Officer of Stentor Resource Centre, she was named Woman of the Year by Canadian Women in Communications. Our guest, is therefore not only an expert in the management and development of strategic alliances, and in the field of regulatory issues surrounding the telecommunications industry, but she has served as both an example and a pioneer for women in telecommunications. It is therefore a particular honour to have our guest address us today.
Ladies and gentlemen, please join me in welcoming Carol Stephenson, President and Chief Executive Officer of the Stentor Resource Centre Inc., to The Empire Club of Canada today.
Good afternoon. I'm delighted to be here.
I'd like to begin with a story about the scientist Albert Einstein, who did so much to shape the world of today. During his years at Princeton University, Einstein taught a popular physics course. Each year, the questions on the final examination were exactly the same ones he had used the year before. One of the other professors got wind of Einstein's practice. He decided to go to the great man's office to urge him to change his approach. "It's not the right way to make up a test," he stated firmly. "Some of the students will track down the best exam papers from last year, and so have an advantage." "I don't think so, "Einstein gently replied. "It's true that the questions remain the same. But the right answers are constantly changing."
Einstein's wisdom has relevance for our business. The telecommunications industry still connects people and companies. But the solutions we provide have changed dramatically. And they will continue to change at a remarkable pace. If we provide our customers with answers from last year's exam book, we'll be hopelessly out of date.
That's why Canada needs genuinely fair competition. To keep our answers or solutions up-to-date we must allow all companies to explore all avenues. That will provide consumers with the greatest choice. My message this afternoon is that Canadian companies have long been leaders in telecommunications and they'll continue to lead, if they are allowed to compete fully and completely with global competitors.
I'll first talk about how Canadians have traditionally been in the forefront of telecommunications, in large part thanks to the efforts of the Canadian phone companies that now make up the Stentor Alliance. I'll then emphasise the need for competitive equity so our enviable record of success can continue.
An Economic Leader
Canada has a proud tradition of leadership in telecommunications. And it's been the Stentor companies that have shaped that tradition. It goes back to the nineteenth century when Alexander Graham Bell made his home here in Canada. The world's first long-distance call was made from Brantford to Paris, Ontario.
And we've continued to build on this early lead. Canadians developed the x.25 protocol that became the world standard for data communications. We developed the world's first national data network and then the first packet network. We're world leaders in satellite technology, conferencing applications for distance education, and telemedicine, all of which means that Canadian business and consumers have access to the most sophisticated telecommunications in the world, a decided competitive edge in today's global marketplace. The Stentor companies are proud to have been instrumental in this success.
That spirit of innovation continues in the Canadian telecommunications companies today. We are acknowledged world leaders in speech recognition technology. We are front-runners in the exploration of advanced intelligent network technology. Thanks to the Stentor companies and the Schoolnet initiative, ours will be the first country to have all its schools hooked up to the Internet, two years ahead of the Americans.
Today, as technologies converge and computing power soars, the Stentor companies are committing still further to innovation. Taken together, our member firms spent about $181 million in research and development in 1995 and will do the same in 1996. And three of the Stentor companies, Bell Canada, BCTeI and Telus, individually rank among the top 20 Canadian businesses for spending on R and D.
But our impact goes much further. We asked Deloitte & Touche Consulting to conduct an economic analysis of the impact of the Stentor companies on the Canadian economy. The initial results clearly demonstrate that our contribution goes far beyond providing dial tone to millions of Canadians.
According to the study, the Alliance is Canada's number-one private-sector employer with more than 85,000 people working for our nine companies. In addition, Deloitte suggests that we contribute another 29,000 jobs through our suppliers in telecommunications and other industries. Because our jobs are highly skilled and knowledge-based, our employees' average salary is $53,000. That means that our payroll alone brings over $4.5 billion a year into the economy--yes, I said billion. That employment value is more than double the next private sector player. Given our capital and operating expenditures which total $13.6 billion a year and the taxes we pay about $1.5 billion--and you thought you paid a lot of taxes--our total contribution to the Canadian Gross Domestic Product is a hair under $20 billion, or 2.5 per cent.
But our impact is more than just a money game. We also contribute to the well-being of Canadians in many ways.
NB Tel is a leader in broadband communication with its VideoActive network. This initiative, which began in August, provides two-way, broadband services to 5,000 homes. Services include very high-speed Internet access, on-line access to the province's daily newspapers and links to an on-line phone store. In 1997, NB Tel will add 15,000 more customers.
In central Canada, we've developed an Intranet, called AutoLinx. It ties together the big car companies in real time with their suppliers and distributors, it allows engineers to consult suppliers and it lets small firms offer just-in-time delivery. The result makes everyone more competitive. And more than that, AutoLinx has been adopted as the North American standard.
In Alberta, we're exploring a wide array of telemedicine applications. We're developing a portable unit complete with all the peripherals necessary for remote diagnostics and monitoring. The result allows Canadians in rural and remote locations to stay in their homes rather than going to hospital in a distant urban centre.
In B.C., we're an active partner with Simon Fraser in its TeleLearning Research Network, whose projects include a Virtual University which connects 750 students and 130 professors in 12 sites. Through contributions, such as this one, Simon Fraser was recognised in Maclean's recent issue on universities as the number-one comprehensive university.
These examples are but a few of the ways that the companies in the Stentor alliance bring new value to communities across the country. In fact, given that we have physical presence in so many cities and towns in Canada, we also understand we have a responsibility to giving something back to those communities and the people who live in them.
In 1995, for example, we supported Canadian cultural organisations with over $10 million in donations. Recipients included virtually every major arts organisation in Canada. Here in the Toronto area, the list includes the Art Gallery of Ontario, the Science Centre, the Shaw and Stratford festivals, the Toronto Symphony and the Young People's Theatre.
Here in Canada we have built a dynamic telecommunications industry with a strong international presence. Firms, such as Nortel and Newbridge, are spin-offs of the Canadian telephone companies and remain major suppliers. And they are also, based on the experience they gained with us, important players in world markets.
We have also built a superb communications system. Canada is the most plugged-in nation on earth, despite the fact that we have the world's second-largest geographic area. More than 98 per cent of Canadian homes have both a telephone and a television. Cellular and paging services are available to more than 94 per cent of the population. No other nation can make these claims. The Stentor companies are proud of the contribution they've made to Canadian leadership.
Being as wired as we are also makes Canada an extremely attractive location for economic expansion. A recent survey of the 1000 largest companies in the world, undertaken by our international allies, MCI and British Telecom, underlines the importance of telecommunications in the decision-making process. The availability of sophisticated telecommunications ranks third, behind only political stability and a skilled work force. In fact, 89 per cent of those large companies say that telecommunications will continue to become even more important to global expansion plans over the next five years.
The Importance of Getting the Rules Right
Will our ability to provide for Canadians continue? Will we be able to provide the same level of innovation we have in the past? Will we be able to ensure that Canada continues to maintain its position of world leadership in telecommunications?
With some policy changes, yes. The present regulatory framework which governs long distance hobbles the Canadian companies that make up the Stentor Alliance. And because we are hobbled, so are you as our customers.
Let me be emphatic about this point: We are not asking for special favours. But we do ask that we not be singled out with special restrictions. Let's have a uniform set of rules that applies to everyone. If we're running a race, some players shouldn't be allowed to sprint while others are forced to clear a set of hurdles.
First, we can't package our services to you. Our 300 competitors can.
I'll explain. Many of you want one-stop shopping for all your telecommunications needs. You are looking for suppliers that anticipate and exceed your needs. You recognise that purchasing a group of products from one supplier provides convenience and is often cost-effective. We surveyed our business and residential customers and found that between 60 and 70 per cent of them want some form of packaged services. For example, consumers would like to see a single bill for communications and entertainment services and we'd like to provide it. But Stentor companies are not allowed to combine our services. All our competitors can.
For example, in Nova Scotia, AT and T is offering Halifax and Dartmouth residents free speciality cable TV channels for six months if they switch to the company's long-distance service. Another competitor, ACC, has announced plans to bundle services including long-distance, toll-free service, local services, phone cards and even Internet access.
We can't even provide a single bill for our wired and cellular services. It doesn't make sense to you, our customers. And it doesn't make sense to us.
Second, we're not free to offer special rates to large customers. Our 300 competitors can.
For example, if a group of franchisees asks for group discounts on their telecommunications needs, the Stentor companies cannot provide special rates. Our competitors can.
If a government department asks us to include the cost of training, maintenance and service as part of a single price on long distance, we could not bid on this contract and yet 300 competitors can.
Third, we're not allowed to respond instantly to the demands of the marketplace. Our 300 competitors can. When the Stentor companies want to introduce a new price, product or service so that customers can benefit immediately, they must make a formal request to the CRTC. The Commission generally takes weeks to make its decision. We'd like to provide that innovation to you in 24 hours. That's what you deserve.
It's a huge understatement to say that long-distance service has caught on in Canada. As I've suggested, today more than 300 companies provide long-distance service as carriers, resellers or rebillers. The Stentor companies have diligently complied with all the conditions of competition. We introduced equal access faster than our American counterpart did and we have now completed the work to unbundle access to our local services. Today, the Canadian long-distance market is flourishing and the time has come to unshackle the telephone companies and let them compete on an equal footing.
The Way Forward
These unfair restrictions weaken a key industry and that will ultimately affect all Canadians. Canada is going out of its way to protect corporations that are among the largest in the world. A and T, for example, is the second-largest telecommunications firm in the world. Sprint is twelfth-largest. Bell Canada, the largest of the Stentor companies, is only twenty-fifth. I ask you, why are we protecting these global giants? Why are we protecting them from us?
Perhaps it's because Canadians have a tendency to step aside as others enter the picture. We seem to belittle ourselves. As actor Donald Sutherland said: "Canadians, and I am one of them, are forever apologising for themselves. It's as though being Canadian is the original sin."
We need to accept ourselves and see our strengths. And telecommunications is one of our home-grown strengths.
Toronto Star columnist David Crane has written: "The telecommunications industry is especially important to Canada's future, not only because of the expertise Canadians have developed in the industry, but also because the communications and computer content industry will be the most important industry for growth as we head into the next century."
Properly supported, our telecommunications resources can be a major impetus for knowledge creation in all sectors. Within our grasp is the possibility of making Canada a living lab for the future. That is what the companies that form the Stentor alliance want to build for you.
Innovative telecommunications applications will strengthen opportunities in all regions. They will provide access to all Canadians, wherever they choose to live, to employment, education, health care, entertainment, investment, and the wealth-creating opportunities of the information age. In short, the telecommunications industry is very much the key to our future.
But don't take my word for it. Economists like Nuala Beck and Michael Porter, visionaries like Don Tapscott, and major consulting firms like Arthur Anderson and McKinsey all agree that an innovative telecommunications sector is crucial for a dynamic economy.
This brings me back to my message. Canadians have a proud tradition of leadership in telecommunications and I'm very confident we'll continue to lead if we can compete fairly and openly with our foreign competitors. If we are allowed to succeed, Canadian business will have world-class communications to increase their competitiveness and Canadian consumers will have the right to innovative services that are convenient and user-friendly.
The Stentor companies envision a future where Canada remains a respected leader in telecommunications. We believe our past accomplishments and present stature position us to lead Canada forward.
I'm an optimist. I'm convinced a broad range of firms can flourish in the telecommunications industry. I'm convinced the real winners will be Canadians who will benefit from the employment and the services that will result from a vital industry where everyone is free to offer the services that Canadians need and want.
So what are we waiting for?
The appreciation of the meeting was expressed by Marcia McClung, President, Applause Communications Inc. and a Director, The Empire Club of Canada.