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"Bell had hoped to bring the same world-leading wireless HSPA+ technology to small unserved communities in Ontario and Québec that we’ve rolled out to 93% of the Canadian population already. More than 100 such locations - communities like La Patrie, Cloud Bay, Denbigh, Morson, Stratton, Wawa - would have had access to the fastest mobile Internet access speeds and the latest voice and data products and services available. In fact, a significant number of these communities wrote letters of support for our HSPA+ proposal directly to the CRTC. Instead, the CRTC insists we roll out less-advanced DSL technology." said George Cope, President and CEO of Bell and BCE Inc.
"Considering the federal government’s commitment to ensuring Canada’s leadership in the digital economy and its strong support for intensified investment in the latest broadband technologies, this is quite frankly a shocking decision by the CRTC. It’s a clear opportunity missed, and it perpetuates the digital divide between rural and urban Canada," said Mr. Cope.
It is worth noting the dissenting opinion of the CRTC’s vice chair of telecom, Len Katz, who wrote that the CRTC does need to embrace the latest broadband technology available: "By limiting the rollout of broadband services to DSL technology, the commission has taken a static view of technology and failed to recognize the dynamic changes taking place in functionality and cost from newer technologies," Mr. Katz wrote.
The CRTC also increased Bell’s $488-million deferral account balance to $583 million with interest charges of close to $95 million - despite Bell having little control over many of the delays in the decision - and limited the amount Bell could spend on rolling out rural broadband to $306 million. The CRTC also requires Bell to return approximately $250 million, including interest, of deferral account funds to Bell residential home phone customers in urban areas of Ontario and Québec in the form of credits, rebates or promotional offers. Bell will announce plans to do so in coming days.
In 2002, the CRTC required established telcos, including Bell, MTS and TELUS, to create deferral accounts that would hold surplus funds collected from urban home phone customers for an unspecified later purpose. The CRTC believed that new competition in telecom would be hampered if the telcos simply reduced prices for urban customers instead of building up a deferral account.
In 2008, the CRTC agreed that Bell could use its deferral account funds to build broadband out to 112 underserved communities in Ontario and Québec. In 2009, Bell applied to the CRTC for permission to deploy the latest HSPA+ broadband technology, which Bell was already planning to roll out to 93% of the Canadian population by the end of the year. Yesterday, the CRTC decided Bell should instead bring less-advanced DSL (digital subscriber line) technology to these communities.
Financial guidance for 2010
Based on yesterday’s CRTC decision, there is no change to BCE Inc.’s guidance for 2010 for revenues, EBITDA, capital intensity and Adjusted EPS. However, the Company no longer expects 2010 free cash flow at the high end of the guidance range.
BCE’s original guidance for 2010 issued on February 4, 2010, its increased guidance issued on August 5, 2010, and its current expectation are as follows:
As the CRTC has increased Bell’s accumulated deferral account balance by an amount of $95 million in interest charges, we now expect restructuring and other charges for 2010 to be in the range of $170 million to $220 million. [September 2, 2010]
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