Why Bell Canada Must Go Private…

I was perplexed at first that Bell seemed to be shunning offers from other public companies in favour of one backed by the Teachers’ Pension Plan of Ontario, but then I remembered the Achilles heel of public companies and how this related to Bell’s current predicament:

Bell is facing stiff competition from perhaps the most highly regarded cable company in North America: Rogers. Rogers is able to roll out new high bandwidth services to customers due to advantages it has in the last connection it has to your house. While Bell uses twisted pair cable, Rogers has already invested in much more expensive, but much higher capacity, coaxial cable.

My guess is Bell is capable of maybe 20-50 Mbps based on their current infrastructure, while cable is theoretically in the Gbps+ range depending on how it is configured. There are already trials underway with Videotron in Quebec and other MSOs where they are looking to offer residential customers 100 Mbps services on top of all the other video services offered over the same cable! This isn’t even a fair fight.

It is clear that Bell is going to have to spend A LOT of money in the short term to be competitive with Rogers in the long term. The most intelligent investment would be to go with fiber to the home, to give Bell all the future capacity they will need, and actually be able to leapfrog Rogers.

This kind of short term investment for long term benefits is exactly what a public company sucks at. Their focus on quarterly results means that strategic thinking always takes a back seat to cost cutting, or other short term fixes. Being a private company allows you the luxury (assuming your private owners have vision and a longer term return on investment) of investing heavily today to be a leader in the future. This is exactly what Bell needs today!

Maybe I am giving them too much credit, or there are other good reasons that I don’t see, but I think this is why Bell is so interested in the opportunity to become private.


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