Telecommunications is an industry prone to boom-and-bust cycles. Sometimes, it booms and people make a lot of money. Other times, it goes bust. Currently, it is in a bust phase.
That’s why it was so remarkable when Hydro Ottawa announced it was expanding its services and moving into other businesses including telecommunications. It is also partnering with a natural gas distributor to sell electricity in the retail sector, as well as moving into selling services to customers outside Ottawa and in the area of the former townships of Cumberland, West Carleton and Osgoode. Hydro Ottawa has already purchased Casselman Hydro, which currently has no Ottawa customers. Hydro Ottawa said it wanted to expand its service to increase profits.
Hydro Ottawa said that since it already owns much of the infrastructure needed for telecommunications such as the wires and the hydro poles that it uses to carry electricity, it is the right company to enter the telecommunications field. This may be the right way to think about telecommunications. But it is not the right time to take a risk in the telecommunications market.
Telecommunications companies have been losing money for the last year and it does not appear that there will be a turn around until at least next year. JDS Uniphase just announced a $1.2-billion US loss in its first quarter. It has laid off about 16,000 workers over the year. Heavier losses are expected in the second quarter and beyond. These are not encouraging signs that invite investment in the market.
Sales in personal computers are now considered to be decreasing according to IDC Canada, which says sales have dropped 17.5 per cent over the previous year. The economy is slowing down, shaking consumer confidence. The economy was starting to slow down before, but thanks to the events of Sept. 11, consumer confidence has been utterly destroyed.
All these factors point toward the folly of expanding at this time for any company. What Hydro Ottawa should be doing is finding safe, dependable, reliable sources of revenue. That means solidifying its customer base in Ottawa, not expanding into uncharted waters, unless it knows that it can gain customers. In the sales industry, that is never certain. A lack of certainty means that the cost of providing services to people in Ottawa may actually go up, not down, if any of the expansion projects fail. That would be the exact opposite of what Hydro Ottawa plans to do for its customers.
Besides cost, Hydro Ottawa also has to worry about the quality of service. It is sure to suffer if it becomes too involved with other services. Service is what Hydro Ottawa should be worrying about. All the profit in the world will not mean much if it cannot provide quality services and keep its customers happy. Poor quality service means no customers and no customers mean no profit.
–John Guise