Group Telecom exits ATM to pursue metro Ethernet

Group Telecom, which emerged from bankruptcy protection earlier this year, is emphasizing its Internet and data networking products, but one industry

analyst says the carrier should also offer an Internet Protocol virtual private networking (IP-VPN) product.

Three years ago, Toronto-based Group Telecom described itself as Canada’s largest independent competitive local exchange carrier. It sought bankruptcy protection about a year ago, and was later bought by Vancouver-based 360networks Corp.

Although Group Telecom still offers local and long-distance voice services, it is placing more emphasis on its packet-based networking services, including optical virtual private networks, Internet transport and metro Ethernet.

“”I don’t expect we would become the long-distance voice provider of choice to banks in Canada,”” Tal Bevan, Group Telecom’s president of business operations, said at a briefing to reporters and analysts late last week.

Group Telecom owns about 53,000 route kilometres of fibre optic cable connecting 60 cities in North America, and has 17 metro networks in Canada.

The carrier plans to phase out its Asynchronous Transfer Mode (ATM) service, which it uses on its inter-city links, said Michael Stephens, Group Telecom’s vice-president of product management. He added the firm has built multi-protocol label switching (MPLS) into its infrastructure but has not activated the feature yet.

Because the network is based on both Ethernet and Synchronous Optical Network (SONET), it’s easy for users to operate a wide-area network because they don’t have to hook up to various carriers’ networks using several different protocols, Bevan said.

“”We don’t have to worry about trading minutes or trading traffic with anyone else,”” he added.

Warren Chaisatien, senior analyst for telecommunications at Toronto-based IDC Canada Ltd., said telecom managers are not too concerned about the number of networks that their traffic crosses, but they only want to have to deal with one carrier, and they will hold that carrier accountable for any problems on the network.

“”People are starting to use IP-VPN technologies to complement Frame (Relay) and ATM,”” and to replace on private line services, Chaisatien said. “”GT will have to address that.””

Part of Group Telecom’s sales job is convincing customers that Ethernet is easier to manage, but company officials are also putting a lot of energy into convincing prospective clients that the firm is financially viable.

When Group Telecom filed for protection under the Companies’ Creditors Arrangement Act in June, 2002, it had about $1.6 billion in debt. Now, the firm is debt-free while 360networks owes $305 million, Bevan said.

“”It’s so cool – I’m going up and down Bay Street meeting with customers,”” he said. “”Last summer, I was going up and down Bay Street meeting with the members of our lending syndicate.””

Now that 360networks is privately held, the company does not publish complete financial results, but Bevan said Group Telecom’s monthly revenues are $18 million and it has $99 million in cash.

“”They are very prudent and will invest only when they see demand, rather than ‘If you build it they will come,’ because they did that before, and nobody came,”” Chaisatien said.

Chaisatien praised Group Telecom for its focus on business data communications services, because that’s one of the few growth areas in the telecommunications service industry.

IDC Canada forecasts Canadian data communications revenues will be $6 billion this year, up 9.5 per cent from $5.5 billion last year.

“”Telecom and IT has been very quiet lately, so nine per cent growth is impressive,”” Chaisatien said, adding revenues from local voice services are stagnant while long-distance revenues continue to drop.

Bevan said the company to continue offering services under the Group Telecom name, because it was a strong brand prior and during its bankruptcy.

“”We are owned by 360networks, but you will see us branded as, driven by and marketed as Group Telecom.””

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