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Bruce Telecom gets Council support for new budget

February 2, 2015

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Bruce Telecom CFO Steve Soychak presents 2015 budget to Kincardine Council

At a special meeting of Kincardine Council, and after some tough questions for CFO, Steve Soychak, Council has give the green light to Bruce Telecom for 2015.

Bruce Telecom CFO, Steve Soychak

Soychak pointed out that subscribers have been declining by six per cent (6%) annually and that loss of revenue is difficult to make up with other services.

"We work hard to keep operational expenditures down however, it's a challenge as increases are not proportional to revenue due to decreases." He added that land lines had also seen a decline as more people move to cell phones.

Councilor Randy Roppel asked what Bruce Telecom "... intends to do about the decrease in land lines.  Operational expenditures are lower but increasing as a percentage of revenue.  Where are the costs and what's driving them?"

"There are expenses, such as wages, insurance and building maintenance and utilities, that are not related to the cost of service and that little can be done about," said Soychak. "In this 'organic' budget we are not looking at territorial expansion

"So, what you're saying is to keep running Bruce Telecom we need to look at other sources of revenue in order to over-ride the costs, or level off those costs?" said Roppel.

"We need to look at other sources of revenue or opportunities to bolster our revenue base to support a good return after operational expenses."

 If we don't give you a budget, you can't do a heck of a lot, right?" said Roppel.

"That's an awkward question, give we are now in 2015.  You can approve the budget, or not," replied Soychak.  "The Board has approved it and we are bringing it to Council." 

Councilor Laura Haight asked what percentage is being lost to competition, for example in Southampton.

"It's very challenging to get those numbers," said Soychak.  "The reasons for someone leaving usually are very neutral.  They may be going to another provider or another type of service such as cell phones."

"We are seeing losses but we know that our competitors have not become significantly aggressive."

Deputy Mayor Jacqueline Faubert wanted to know if there was any way to 'buffer' the budget by getting involved in the provincial initiative regarding broadband expansion in rural areas. "Are there any projects that might receive funding to offset expansion or upgrades in our territory?  Speed is going to be a very important when it comes to service."
 
Soychak assured Council that Bruce Telecom was looking at funding opportunities wherever possible and when they arise.

"I think portability is a big issue today," said Councilor Maureen Couture, "that's why people are getting rid of their land lines."

Soychak pointed out that it isn't speed but bandwidth that makes a difference and that depends on distance. "It is very costly as a rural population is spread over a greater distance  and, therefore, there isn't the revenue stream that would warrant the investment."

The Capital Plan is $3M and a certain amount is being allocated towards new or replacement infrastructure, and new meaning adding to existing infrastructure to provide services to growing or changing subdivisions and not large geographical expansion, and also to upgrades."

Click the orange arrow to read, the second column

Randy Roppel said that if $3M was taken from cash reserves, are there adequate cash reserves
and by taking the $3M out of the reserves, does that in any way hinder the way that Bruce Telecom will require financing to operate the business.  So, there's $5M and if you take the $3M leaving $2M, will there be a strain on the operating side of this business?

   
               Councilor Randy Roppel

"Not within this current year," said Soychak. "In future years, it will depend on investments."

"This is very much a status quo budget," said Deputy Mayor Jacqueline Faubert. "Pulling from reserves to maintain the status quo, a company couldn't do this two, three or four years in a row.  Is this the ideal budget or in context?"

"There was one point in time," replied Soychak, "that telecom was compared to water or a service utility.  That is no longer the case."

There is $600,000 in the Kincardine budget for Bruce Telecom for and the $784,00 being asked for is before distribution and is based on last year.

Councilor Gord Campbell said that he would like Bruce Telecom to keep the money and not pass it on to the Municipality.  "Council put you in this position, and I would support no income to the Municipality this year.  If you need it to upgrade your systems, then you should keep it."

Councilor Laura Haight said that it was unfair to say that Council put the company in this position.  "This is a challenge and loss of land lines is the reality and it's where we are seeing the largest decline.  If you meet all the targets, any dividend would have to be paid out.  If we defer the $600,000 it would be an additional tax increase of six per cent (6%)."

Roppel referred to the $600,000 and said that the bottom line to him was simple.  "Does the amount of money you are paying this Municipality as a dividend put hardship on operating Bruce Telecom?  If the answer is no then we don't have a problem but, if the answer is yes, then we have a big problem."

Mayor Anne Eadie said that the plan is for the municipality "... to go forward, whether it's with DGR money or Bruce Telecom money.  We have to gradually w33ean ourselves away from that and the money should go into operating and not into capital so we don't find ourselves in a situation like this." 

After all was said and done, Randy Roppel put forward the motion that "Council approve the Capital and Operating Budget of Bruce Telecom for 2015".  The motion was carried unanimously and Bruce Telecom has the green light for another year.


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