Bruce Telecom planning $6.2-million infrastructure upgrade

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News

By Kristen Shane

 

Bruce Telecom is planning a $6.2-million network upgrade that, by the end of next year, should provide high-speed Internet and digital TV access to more of its customer base.

 

Board chair Richard Martin, CEO Eric Dobson and several other board members and senior managers of the municipally-owned telecommunications company outlined the infrastructure upgrade plan during a regular update to Kincardine council last Wednesday.

 

Some aspects of Bruce Telecom’s network are outdated, said Dobson. 

 

It also now runs a landline phone service monopoly in this area, and is anticipating its federal regulator, the Canadian Radio-television Telecommunications Commission, to soon force it to accept competition.

 

With potential new competitors breathing down its neck and a network that needs a boost in order for the company to keep current customers and improve its product offerings, Bruce Telecom officials investigated infrastructure upgrades.

 

They decided to use a combination of copper and fibre-optic lines to boost network coverage.

 

“The project drives fibre-optic (lines) deeper into the network and leverages existing infrastructure to provide higher bandwidth,” vice-president of operations Wayne Eichenberger told council.

 

The combination of using fibre and copper technologies is about five times cheaper than using another mostly-fibre option, said Dobson afterward. And, it’s similar to techniques that Bell, Telus and AT&T have used previously.

 

“It’s a proven technology, and we’re not breaking new ground,” he said.

 

Well, not figuratively. A two-phased approach would see shovels hit the ground in the northern part of the company’s service area, in the Port Elgin and Paisley areas, this year to do upgrades worth $3.8 million. Next year, the company would tackle the Kincardine and Tiverton areas, shelling out another $2.4 million.

 

But before it digs in, Bruce Telecom needed to know it would have the money to fund the multimillion-dollar investment.

 

Its management, board of directors and staff took pay cuts this year to shore up the company’s accounts. Council also agreed to a drop in the municipality’s yearly dividend payments from $1.2 million last year to $800,000 in 2010.

 

With the extra cash, and another three years of stagnant low municipal payouts, Dobson estimated the company would have most of the money it needs to finance the network upgrade and other capital spending planned for the next couple years. But, he estimated it would still be short about $2.7 million combined for 2010 and 2011.

 

So, it plans to either get a $2.5-million line of credit from a bank or credit union, or financing from a provincial government agency that can offer low-interest loans to groups doing public infrastructure projects such as this.

 

If all goes as planned, “By 2014, we’d be in a position where we could restore the normal (dividend) distribution to the municipality,” said Dobson.

 

In the same presentation, Bruce Telecom’s new chief financial officer, Bart Cameron, explained that the company’s audited financial statements show that last year its income from operations was only $430,000, down from $723,000 it had estimated in February. Part of the reason for the bigger hit was because the company took more write-downs for unsold stock whose value had slumped since the company originally purchased it.

 

Bart Cameron, Bruce Telecom’s new chief financial officer, speaks to council last week. (Kristen Shane photo)

 

To those taxpayers worried that another such poor investment could happen again, Dobson said, “We are not spending the ($6.2 million) on inventory that wouldn’t be needed for many, many years. This is a capital spending program that will have immediate impact.”

 

Almost every customer in Bruce Telecom’s traditional service areas should have access to high-speed Internet. About 80 per cent should have access to the company’s TV product, including high-definition TV, which is currently only available to about a quarter of those customers.

 

The company is now sitting on better financial footings than it ended last year. It earned $425,905, about $44,000 more than expected in the first four months of 2010, mostly because it saved on operating expenses by cutting costs.

 

“We’re slightly ahead of budget, which is very, very positive,” said Cameron.

 

Nevertheless, council members weren’t all quite ready last week to okay sinking $6.2 million into the ground.

 

“I think when we’re spending that kind of money, we need to see a plan,” said councillor Ron Hewitt.

 

It’s coming, said Eichenberger. Last week’s update was just an introduction. The company has sent a Request for Proposals to 10 potential contractors to work on the project, and expects to start sifting through their proposals by mid June. It plans to then recommend one to its board of directors and finally council, along with a more detailed business plan, in late June.