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| Visions's End |
July 9, 2002 |
When jean monty resigned from his post as the head of bce, it not only marked the end of his 26-year career with the company, it may have also sounded the death knell for BCE’s convergence strategy.
As chief architect of BCE’s plan for diversification into connectivity, commerce and content, Monty aimed to transform BCE from a slowgrowth telephone company into a high-speed Internet company.
This strategy was built on the idea that owning the “pipes” (wireline phones, Internet, satellite, wireless phones) was only one part of
a larger economic equation. The other components were content and services, which could then be delivered to consumers through the pipes.
Monty had watched the creation of AOL-Time Warner and saw it as a model for the converged future.
From its roots as a telephone carrier, BCE branched out into ecommerce services (BCE Emergis), Internet access (Sympatico, Bell Nexxia), media (CTV, The Globe and Mail), wireless service (Bell Mobility), Web sites (Sympatico.ca, TSN.ca,), satellite television service (ExpressVu) and cable channels (TSN, The Discovery Channel).
Puzzle pieces
But the fruits of this union between content, commerce and connectivity have yet to materialize. While the billions of dollars spent by
Montreal-based BCE have given it a large portfolio with top-notch assets, it remains a company of mini-empires that do not seem to work much together.
“Convergence is just not there, it’s someone’s pipe dream,” said Eamon Hoey, a senior partner with consultancy firm Hoey & Associates in Toronto.
Still, Hoey is willing to give BCE the benefit of the doubt—and more time—before declaring its convergence drive a complete failure. “I still continue to have a healthy skepticism about the strategy. We won’t know for a couple years [if it will be successful].”
This is not the first time BCE has attempted to diversify away from the telephone business. Beginning in the 1960s under the leadership
of Jean de Grandpre, the company expanded into oil and gas, pipelines, financial services and real estate. While these endeavours saw some early success, many turned in poor results and by 1984, BCE returned to its core telecom operations.
Assembling a picture
This time around, the challenge for BCE is to create an operating structure that fosters cohesiveness among its assets.
This could be a very tall task given BCE’s size. “For Monty’s convergence strategy to pay off, they need an integrated approach and they need to break down the silos,” said Peter Pleckaitis, strategy practice leader with PwC Consulting’s infocom, communications and entertainment group in Ottawa. “I don’t see a lot of evidence of that occurring yet.”
Perhaps the best illustration of BCE’s predicament is Bell Globemedia, which owns Sympatico.ca,TSN, The Discovery Channel, The Globe and Mail and CTV. In an ideal world, content from the sports channel, the newspaper and the broadcaster would be distributed through a variety of streams.
TSN, for example, would offer content on the Web at TSN.ca, pump it out to wireless users looking for sports scores and transmit it to satellite consumers via Bell ExpressVu. This is the classic create-it-once, use-it-manytimes strategy. The problem, however, is that wireless users have not shown much interest in getting sports scores from TSN, let alone paying for them.
And the industry is not yet in a position to easily stream sports highlights through TSN.ca.
Pleckaitis said BCE has the luxury of time because its business units are well managed and they will continue to thrive as separate entities. Ian Angus, president of Angus Telemanagement Group in Ajax, Ont., said the one thing BCE’s diversification plan has going for it is its breadth of business units. In a sense, he said, BCE has placed multiple bets hoping that one pays off.
“Monty cast the net wide enough that he might find the one that works, but most of them won’t,” Angus said. “It is a strategy that won’t produce results in one year. It will likely be 10 years from now before we find out what comes out of it.”
Angus said it is ironic that BCE’s best asset may be its bread-and-butter telephone operations.
Although no longer very sexy and growing at a modest rate at best, the telephone division still generates a majority of the company’s profits. As many alternative carriers go out of business, Bell will likely become one of the last carriers left standing in Canada.
If this scenario materializes, Angus said, Bell will be one of the dominant connectivity players and find itself in a great position to deliver other companies’ services and content through its pipes.
“It may not be sexy but it is a solid long-term business. The Internet still has a lot of growth to come; wireless has a lot of growth to come. Basic phone services will see new things. For all of the attention the media assets get, [BCE] may make more money from dial tone
than from selling newspapers or (the current affairs show) W5.”
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