British Columbia Telephone Company Business Information, Profile, and History

History of British Columbia Telephone Company

Canada's second largest telecommunications company, British Columbia Telephone Company (BC TEL) provides local and worldwide telephone and telecommunications services to subscribers in its operating territories. BC Tel operates as a public utility and is regulated by the Canadian Radio-Television and Telecommunications Commission (CRTC) which oversees telephone rates, services--including interconnecting agreements--competition, new entrants into markets, earnings, and issuance of share capital.

In addition to providing basic telephone service, BC Tel and its subsidiaries offer advanced personal communications services, voice and data retrieval equipment and services, wireless communications, telecommunications and satellite equipment maintenance and repair, research and development, management consulting, information technology and financial services. Through several strategic alliances with other telecommunications companies, BC Tel also participates in joint agreements that include advanced technology applications for the global market.

BC Tel traces its corporate beginnings directly to the Vernon and Nelson Telephone Company, founded in 1891 to supply telephone service to British Columbia. By the early 1900's, the company had purchased the assets of several smaller telephone companies throughout the province and had received authorization to extend operations to all parts of British Columbia. In 1904, to reflect its newly expanded service area, the Vernon and Nelson Telephone Company changed its name to British Columbia Telephone Company, Limited. The company obtained a federal charter from the Canadian government in 1916, thereby securing future rights to operate anywhere in British Columbia and to extend its lines outside the province once the company incorporated under the federal organization. In 1923, the company transferred its assets to the federal organization and became the British Columbia Telephone Company.

For the next fifty years, BC Tel continued to expand coverage in its operating territory by merging with and acquiring other British Columbian telephone companies. BC Tel also assumed responsibility for part of the Government Telegraph and Telephone Service in the province. In 1926, a major portion of BC Tel's stock was acquired by the National Telephone and Telegraph Corporation, later named Anglo-Canadian Telephone Company of Montreal. In 1962, Anglo-Canadian became the controlling shareholder of BC Tel, holding a 50.2% interest through an arrangement with its parent company, the GTE Corporation.

During this half century of increasing its territorial coverage and enlarging its customer base, BC Tel also expanded services and adapted new technologies to its operations. In 1941, the company's charter was amended to include operation of wireless telephone and radio-telephone systems. In 1973, BC Tel introduced Dataroute, the world's first nationwide digital data transmission service. Some of the more common applications of Dataroute include high volume business data transfer, on-line banking, reservations services, and computer time-sharing. In 1979, BC Tel acquired two electric companies and formed the Microtel Limited subsidiary. Microtel manufactured and serviced Spacetel satellite communications equipment which provided voice and data service to remote areas.

By the late 1970's, competition in the telecommunications field heightened as the industry increasingly depended upon information technology. Profitability and growth, which had traditionally ensued from expanding territorial coverage, now resulted more from improving technology and customer service. In response to these market changes and the corresponding increase in customer demands, BC Tel underwent a corporate-wide reorganization in 1982. Several divisions and subsidiaries were established in an effort to compete more effectively in existing markets as well as introduce new technology products. Operationally, telephone operations were reorganized into five areas, each of which was accountable for service quality and financial performance. In mid-1982, the Business Telecom Equipment division was created to manufacture business terminal equipment. In 1985, BC Cellular Limited was formed to introduce and operate cellular telephone service, and, in 1986, Telecom Leasing Canada was established to offer financial services to BC Tel customers, including point of sale financing for terminal equipment.

Within this rapidly changing industry, management felt that future successes depended upon a committed and dedicated work force. However, BC Tel had a reputation for poor labor relations which dated back to the 1920's and was exacerbated by a bitter six-week labor strike in early 1981, the third prolonged work stoppage in less than 10 years. In response to this problem, the reorganization effort included a new program to improve management quality for both executives and labor. The new system encouraged employees to identify, analyze, and solve work area problems, provided numerous training courses and workshops, and offered cash awards to employees who proposed money-saving ideas. In 1989, BC Tel was one of seven recipients of the Canada Award for Business Excellence.

Early in 1988, the Diversified Operations division was established to concentrate on competitive activities. Several product-specific divisions such as B C Cellular, Business Telecom Equipment, and Telecom Leasing Canada were dissolved as separate entities and transferred into this new business unit. Also included in the Diversified Operations Division were the Viscount Industries Limited subsidiary which designs, manufactures, markets, and distributes building information, access, and communications systems throughout North America and the Canadian Telephones and Supplies subsidiary which implements network switching and electrical contracting, and designs and installs fire alarms and security systems. Later in 1988, BC Tel acquired the Canadian management consulting firm of SRI Strategic Resources Inc. SRI specialized in providing consulting services to information systems, marketing, financial planning, human resources and general management. In 1990, BC Mobile Ltd. was established as the company's wireless communications subsidiary to provide radio-paging throughout British Columbia. Both the SRI and BC Mobile Ltd. subsidiaries were included in this division.

A strategic alliance between BC Tel and Northern Telecom Canada Ltd. (NTCL) in 1990 established Prism Systems Inc. to design and manufacture advanced network management systems for markets worldwide. The agreement specified that Prism was owned 49% by BC Tel and 51% by NTCL. Because Prism's operations required components of the transmission and network management systems of Microtel Limited, NTCL acquired Microtel's Central Office Switching business as part of the transaction.

To increase flexibility and readiness for future opportunities and challenges, BC Tel was again restructured in 1991. The company's new President and CEO, Brian Canfield, formed three core divisions: Business, Small Business and Consumer, and Emerging Business. These units were designed to reflect a market-driven, customer-focused operation and were supported internally by operational units within each division as well as shared corporate resources. Management felt that this new structure would best support BC Tel's corporate mission: 'We make it easy for people to exchange information--anywhere, anytime--by devising imaginative telecommunications solutions that are economic and exceed customer expectations.'

The Business Division manages a broad portfolio of communications products and services for BC Tel's largest business and government customers. Monthly revenue from each client exceeds $2000; collectively, this group supplies BC Tel's core revenue. Operational services provided include voice mail and information retrieval, while business services include strategic customer relations, market and product development, and sales. The Small Business and Consumer Division provides telecommunications products and services to BC Tel's residential and small business customers who spend less than $2000 per month. Operational services provided within this division include customer and operator service, sales, and market management, while business services are supported by corporate resources.

The Emerging Business Division is responsible for recognizing and developing new business opportunities in three areas: emerging technologies, enhanced telecommunications services, and related business. The emerging technologies unit brings new and evolving telecommunications products and services to the market. The business unit includes a portable communications division as well as former divisions such as BC Tel Mobility Cellular and BC Tel Mobility Paging which were transferred into the emerging technologies area. The Enhanced telecommunications services business unit is responsible for commercializing innovative services using network-based information technology. This unit's objective is to understand the information exchange requirements of customers in three areas: message services, enhanced communications, and information network services. Message services meet voice and data message needs through products and services such as electronic mail, gateway services to information databases, and Electronic Data Interchange. Enhanced communications develops high speed data applications such as interconnecting local area networks and wide area networks. Future projects include video conferencing and interactive video services. Information network services advise customers on problems in information exchanges.

The related business unit provides support services to internal and external BC Tel customers. This unit includes the formerly separate divisions of Canadian Telephones and Supplies Ltd, Microtel Limited, Telecom Leasing Canada Limited, and Viscount Industries Limited. Also included in this unit are BC Tel Systems Support, the former 3S Systems Support Services Ltd. subsidiary which maintains, repairs, and calibrates a comprehensive portfolio of voice and data equipment and Pachena Industries Ltd., which provides contract design and manufactures electronic products for commercial markets in Canada and the Pacific Northwest.

BC Tel is a longstanding member of Stentor Canadian Network Management. The major telephone companies established Stentor in 1921 (under the name Telecom Canada) to create a route for Canadian long distance service; the cooperative alliance also provided development and government assistance to its participants. Belonging to Stentor gives BC Tel ownership and operating authority in one section of the British Columbian telephone system, including a portion of a coast-to-coast microwave radio relay system which carries telephone, special service transmission, and signals for the two national television networks.

In 1992, BC Tel and the other telephone companies reorganized Stentor, which continued to manage its members' inter-provincial networks and North American connections as well as ensure efficient division of revenues from national services. However, the alliance's other responsibilities were divided between two jointly-held companies, Stentor Telecom Policy Inc. and Stentor Resource Centre Inc. Stentor Telecom Policy began operating in February, 1992, as a government relations advisory and advocacy arm for the member companies. Stentor Resource Centre began operating in January, 1993, developing national telecommunications products, services, and systems with Stentor's member companies. The company also consolidated some of the telephone companies' research and development and marketing activities.

In 1992, a new corporate logo was adopted: BC Tel. In an effort to link the subsidiaries with BC Tel Corporation's strengths and diversified offerings, the names of some wholly-owned subsidiaries were changed: B.C. Cellular LTD became BC TEL Mobility Cellular, and B.C. Mobile Ltd. became BC TEL Mobility Paging. Also in 1992, to demonstrate its commitment to a corporate environmental policy, BC TEL delivered the first telephone directories printed on 100% recycled paper. The directories were recycled from 1991's fully recyclable directories and furthered the corporate goal of integrating environmental protection and improvements into its plans and operations. By 1993, all directories in the BC TEL operating territory were made entirely of recycled paper.

Competitive pressures in the long distance market increased in 1992 with the CRTC decision to allow Unitel Communications, a joint venture of Canadian Pacific Ltd. and Rogers Communications, and B.C. Rail Telecommunications and Lightel Inc. to offer long distance voice telephone services in all but three Prairie provinces. CRTC expected that this decision would continue to lower long distance prices as well as increase the services available to businesses and consumers, although it left unresolved the disparate cost contributions of new entrants versus existing companies such as BC TEL, which was directed to pay 70% of the cost of connecting the new entrants to its network.

BC TEL has traditionally enjoyed strong annual operating and net revenues. Operating revenues have increased an average of about five percent since the reorganization in 1982, and net earnings have increased an average of about five and one half percent. Government procurement programs and the goods and services tax (GST) now applied to most telecommunications products and services will probably reduce income in the years ahead. However, BC Tel anticipates that future revenues will be enhanced by the growing use of facsimile machines and network services such as custom calling as well as the increasing number of subscribers to BC TEL Mobility Cellular.

Principal Subsidiaries: BC TEL Mobility Cellular; BC TEL Mobility Paging; Canadian Telephones and Supplies Ltd.; Microtel Limited; MPR Teltech Ltd.; Telecom Leasing Canada (TLC) Limited; SRI Strategic Resources Inc.; Viscount Industries Limited; ISM Information Systems Management (B.C.) Corporation (51%).