How much do you want to bet Call-Net Enterprises shares jump tomorrow after the CRTC finally - two and a half years to be exact - made a decision about competitive digital network services. The decision is complex and only of interest to senior telecom executives and regulatory bureaucrats but it means Call-Net will get a reduction of $25-million on what it pays incumbent carriers such as Bell and Telus to use their services and facilities. Now, $25 million may not appear to be much money but it's significant considering Call-Net had operating income of $73-million for the first nine months of 2004.
The CRTC's decision is interesting because it attempts to strike a balance between meeting the needs of competitors who need access to facilities but do not have the money or appetite to build them; and the CRTC's mandate to support carriers who operate their own facilities.
The reaction among carriers is telling: Call-Net is "thrilled" because its carrier costs will decline; Manitoba Telecom is frustrated because the CRTC didn't take into account next-generation services, while Telus and Bell say they are satisfied, which means they are secretly overjoyed.
The bottom line is investors will look at Call-Net shares, which closed at $3.85 yesterday in Toronto, and bid it up. Greg MacDonald, an analyst with National Bank Financial, has a 12-month target price of more than $7 on Call-Net. It may be days or weeks before it gets there.

BCE Inc., which owns Bell Canada, issued its fourth-quarter results yesterday. While there were no surprises in terms of profit and revenue, the most interesting news is the continued decline of its local, access and long-distance business, which lost another $246-million in sales in 2004. Clearly, cheaper LD prices and the growth of high-speed Internet and VOIP services are major factors.
The big question is when will the bleeding stop? Will emerging technology continue to eat away at businesses, which not that long ago were ILECs' bread and butter? It would be silly to suggest these businesses will disappear but you could make an argument that voice - at least the traditional type - is dying. This means ILECs must find new ways to bolster revenue, which explains why they are so keen about digital television (Look at how SBC and Verizon are enthusiastically getting into bed with Microsoft do to IP-TV.)
One of the things I wonder about is what ILECs will do with VOIP. They either ignore it and hope a big chunk of their customers stay with the tried and true circuit-switch service, perhaps at lower prices. Or do they join the VOIP party and, as a result, cannibalize their legacy voice business on the idea that if customers are going to use VOIP, they might as well stay with the ILEC rather than Vonage, AT&T/SBC, Primus, et al?
From what I've seen so far in Canada, Bell Canada and SaskTel realize they have to offer a service for consumers who can't live without an IP-based service. Manitoba Telecom, on the other hand, is not getting into the business while Telus has said it will not launch an out of territory VOIP service due to concerns about QoS. No doubt, to VOIP or not to VOIP is a big issue in the executive offices of many ILECs these days.

Apparently, Nortel is going after three of its former executives - Frank Dunn, Doug Beatty and Michael Gollogly - for bonuses they received after allegedly cooking the company's books in 2002 and 2003.
According to the Toronto Star, Nortel filed a lawsuit against the trio earlier this week. It accuses its former CEO, CFO and controller of "improperly using provisions and accruals to manipulate the company's earnings "in at least four fiscal quarters" — including the third and fourth quarters of 2002 and the first two quarters of 2003."
The Star hammers home the point Dunn has to be evil and greedy by printing a lovely aerial photograph of his large estate on the shores of Lake Ontario. Some people call these types of over-the-top places "McMansions". In Dunn's case, I like to call it a "McRoth" because the only rational explanation for Dunn, who children have hopefully lest the nest, to build such an audacious place is to replicate what his former boss, John Roth, built north of Toronto.
As much as Nortel wants to move forward by putting its accounting scandale behind it, 2005 will be another dramatic year for the telecom equipment maker. For each positive step forward such as hiring Peter Currie as CFO, Nortel will take one or two steps backward as it deals with investigations by the FBI, SEC, RCMP and Ontario Securities Commission, as well as those pesky class-action lawsuits.
Then, you've the telecom equipment market, which is going through a massive transition as spending slows and new low-cost rivals come out of Asia. For those of us who cover Nortel, the soap opera has many episodes left.
Personally, I don't see how financial analysts on Bay St. and Wall St. can get a good handle Nortel's prospects when management will clearly be distracted this year, and new competitive factors are coming out of left field.