Friday, July 29, 2005

Canadian VoIP - CRTC End Run

For those of you following the Canadian telecom market, you'd know that on May 12, the CRTC issued its VoIP ruling. In essence it was pro-competition - nothing wrong with that. But it effectively maintained a separate set of rules for incumbents, whereby VoIP offerings in their home markets had to comply with the same set of rules as POTS service - more or less. With all the other VoIP players being left unregulated, this makes it almost impossible for incumbents to be competitive with VoIP. With no economic incentive to do so, the incumbents have essentially stayed out of the residential VoIP market so far.

After the CRTC ruling, the incumbents said they would appeal the decision, and they have taken several opportunities in public forums to air their disappointment in the ruling. For the record, there are two large incumbents in Canada - Bell, which serves Ontario and Quebec, and Telus, which serves BC and Alberta. Together, they control about 80% of the market here. The other provinces are served by the other incumbents - Manitoba Telecom, Saskatchewan Telecom, and Aliant for the Maritime provinces.

Yesterday, the incumbents announced an end run plan to bypass the CRTC. They've decided to take a political route by making an appeal to the Federal cabinet which oversees the CRTC. It appears this is driven by their belief that the public supports their position, so they're gambling that 30+ million people can't be wrong, and this should carry more weight than the handful of CRTC regulators who ruled against them.

We are a peaceful and reasonable people, and I guess the incumbents think they can use moral suasion to get their way. Well, it's worth a try since so much is at stake. And on some levels it certainly seems ridiculous that the cablecos should have a free hand in this market, while nobody is challenging their near monopoly status in the cable market.

Also, I have no doubt that part of their argument will be that by keeping them out of this market, the regulations simply make it that much more likely that Canadians will start getting their phone service from American-based providers. That kind of rattling plays well to Canadian insecurities, and I'm sure the incumbents will play that card at the right moment. Stay tuned.


ipcom said...

Posted by: bda

With regard to "a separate set of rules for incumbents", this just isn't right. Regulating players with market power is the regulatory system for every single country in Europe, and every communications services market in Canadian history. Including cable TV, where providers with market share -- ie cablecos -- have competitive restrictions.

ipcom said...

Posted by: bda

Same thing with regard to "nobody is challenging their near monopoly status in the cable market". Last time I checked, Bell ExpressVu and StarChoice were both competing in every single TV market in the country. In fact, CRTC stats show that DTH -- ie not "near-monopoly" cable -- had about 26% of all subscriptions at the end of 2004, including 52% of all digital subs.

ipcom said...

Posted by: padito

For anyone who cares to read:An open letter to the C.E.O. Bell Expressvu