Ottawa hangs up more phones with $176M deal for Telus VoIP

TORONTO • The federal government is hanging up on 80,000 traditional landlines in favour of using the internet to make voice calls.

Shared Services Canada signed a $176-million, seven-year deal with Telus Corp. to provide Voice over Internet Protocol (VoIP), instant messaging and desktop videoconferencing services for Shared Services Canada, Ottawa announced Thursday. This is new business for Telus, a spokesman confirmed.

The move to VoIP comes as the federal government, like many organizations across the country, attempts to modernize its communications infrastructure for the digital era to improve reliability and cut upkeep costs for legacy systems.

“Upgrading our communication services will equip employees with the modern tools they need to enhance productivity to deliver the programs and services Canadians deserve,” Steven MacKinnon, parliamentary secretary to the Minister of Public Services and Procurement, said in a statement.

This particular decision had to be made by 2018, as suppliers plan to retire approximately 130 of the traditional landline systems the government uses by next year. Shared Services Canada already has more than 100,000 VoIP lines in use.

Ottawa started to ditch landlines about five years ago when it let approximately 120,000 employees in the National Capital Region choose either a mobile phone or a desk phone, but not both.

Residents and businesses across the country have also been cutting the cord on traditional landlines as mobile services become increasingly affordable and reliable. Some businesses, including Big Four accounting firm KPMG, have gone as far as axing desk phones altogether.

The trend is dampening the bottom line for the country’s largest telephone providers, but they’re more than making up for it with the strength of their wireless businesses.

When it comes to mobile, the federal government announced earlier this week that it switched providers to BCE Inc. from Rogers Communications Inc.

It inked a $432.1-million deal for Bell to provide services over six years to 230,000 devices used in more than 100 departments and agencies. In a statement, the ministry said the new contracts have improved rates and more flexible service plans including unlimited national longdistance calls, lower international roaming rates and data usage, and free voiceto-mail text messaging.

The new plans also include a flexible data plan that automatically adjusts based on usage in a bid to avoid unexpected overage charges.

Ottawa named Rogers as its secondary supplier if Bell can’t meet its needs, but a Bell spokesperson said it has “the scale and resources to fulfil 100 per cent of the contract and we fully expect to do so.”

A Rogers spokesperson said it’s “disappointed,” but will ensure all customers stay connected during the transition and looks forward to continued business with the government.

In a note to clients Thursday, Barclays analyst Phillip Huang said losing the contract could be an “incremental headwind” in 2018 for Rogers’ churn, the percentage of subscribers that ditch a provider in any given period.

But he noted the loss could improve its average revenue per user, given the contract has an estimated ARPU of $26 per month.