Copyright 2003 Toronto Star Newspapers, Ltd.

The Toronto Star

December 3, 2003 Wednesday, Ontario Edition

From LexisNexis

Bell Canada wants to use $90 million from a government-created fund to help expand its high-speed Internet service into remote communities in Ontario and Quebec that lack broadband access.

The country's largest telecommunications company said its plan would complement a federal mandate to bring broadband access to all Canadian communities by 2005. "It's a politically astute request, one that will get a lot of positive bounce," said Lis Angus, executive vice-president of Angus TeleManagement Group in Ajax.

By the end of this year, about 80 percent of the 10 million homes and businesses in Bell's operating territory will be able to subscribe to the company's high-speed Sympatico service, which uses digital subscriber line, or DSL, technology to boost the data capacity of standard phone lines.

Bell expects that figure to increase to about 90 percent within three or four years, based on its existing business plan.

Under a proposal submitted yesterday to the Canadian Radio-television and Telecommunications Commission, or CRTC, Bell said it wants to expand coverage further into areas not likely to be served by its rivals.

The company estimated it would cost between $130 million and $170 million over three years to increase broadband access by just 2 more percentage points — increasing total coverage to about 92 percent. The first year of the plan would cost $30 million and bring DSL to about 50,000 more phone lines.

"To get to these last spots is going to be very expensive," said Lawson Hunter, an executive vice-president at BCE, Bell's parent company. "These remote communities are the hardest to justify."

But the demand is there, he added. "We have anecdotal information where people actually leave these communities when they don't have broadband access."

Still, Bell isn't prepared to flip the entire bill. Rather, the company wants to dip into a "deferral account" mandated by the CRTC about 18 months ago as part of its landmark price-cap decision.

Each year, all incumbent telephone companies must pay into a deferral account any operational savings that would otherwise lead to lower phone bills for some consumers. The regulator, hesitant to let local phone prices drop further, decided to create the fund for future initiatives that benefit both consumers and the industry.

Bell has paid more than $200 million into its deferral account, but about half that has already been spent. With $98 million left over, the company wants to use it to expand its broadband coverage in rural areas.

Bell said it will submit a detailed plan — including the communities it plans to target — in the first quarter of 2004. Bell also said it would wholesale its DSL product to rivals wishing to market competing services.

Mark Quigley, research director for the Yankee Group in Canada, said Bell and other incumbents are best positioned to help Ottawa fulfill its mandate.

"If Bell's not going to do this, then Sprint and Allstream certainly aren't," he said.