Light regulatory approach to VoIP players called for at conference in Toronto

The battle over Voice over IP regulation was re-fought November 30 and December 1 in Toronto as Bell Canada begins incorporating newly released research on the telecommunications market into its push for a lighter touch by the CRTC. At the Canadian Institute’s Voice over IP Summit in Toronto, participants heard executives from the several parties to the VoIP debate run once more over their arguments for and against status quo regulation, with a focus on the question of barriers to entry. While several panel speakers cited the low cost of entry into the competitive VoIP market, others warned that costs to provide service are still high, and that Bell’s arguments that it won’t enjoy a position of market dominance ring hollow.The pro-forbearance point was hammered home by BCE Inc. executive VP Lawson Hunter during his short presentation on the first day of the summit. Relying on market research and other studies, he noted that almost 500,000 new households were created in Ontario and Quebec since 1999, the company put only 230,000 phone lines into service – 8% lower than traditional demand would dictate. He further noted that, based on a recent study conducted for the company by Decima Research Inc. (see story in this issue), almost six out of 10 Internet subscribers say they have reduced their usage of their landline phone. The CRTC’s own numbers, he argued, show that Canadians are increasingly prone to viewing wireless phones as superior to landline, and that consumers are clearly substituting other technologies for traditional phone service. Yet, he told the summit audience, "the regulator’s view seems to be that never the twain shall meet, which we view as clearly inappropriate market segmentation." Hunter noted that Bell spends about $3 billion in capital expenditures every year, while Vonage was able to build its competitive service for just $20 million – proof, he said, of the low barriers to entry in the field. After a brief outline of VoIP regulation in other jurisdictions, Hunter said of the CRTC’s position that, "If they persist in that view, it reminds me of the mother watching her son in the marching band out of step with everybody else. Well, her view is that everyone is out of step with little Johnny." Vonage Canada president Bill Rainey’s presentation during the same panel session worked in concert with BCE’s message as the company emphasized its quick growth. The company’s strategy, he said, is to enter markets with a soft launch during which bugs can be worked out of the system before Vonage begins aggressively marketing its service, which it has now begun doing in Canada. It hopes to be in 25 markets over the next several months, supported by guerilla marketing, web advertising and print ads. "We can scale in a matter of days; not weeks, months or years," he said. The strategy appears to be paying off. Vonage’s customer base in the U.S. has grown from 85,717 subscribers in Q4 2003 to 275,615 in Q3 2004, and Rainey says the company is adding over 1,000 customers a day. The reason, he says, is that "Customers have been overcharged and under-serviced for a long time." He said the ILEC’s response has been to create bundles of services to retain customers, a strategy he says is flawed. "Customers didn’t ask for a bundle. No one was begging for one." Instead, he says customers have responded well to Vonage’s no-contract offering. Another voice was added to the argument that the market is competitive when TELUS Corp. VP of regulation Ted Woodhead noted that the VoIP-specific elements of the cablecos’ networks have been put in place for $130 million in Rogers’ case, and $75 million in Shaw’s case, compared to the billions previously sunk by the ILECs into legacy phone networks. "It’s a totally different business case, and this will be the competition we see in the next couple of years." Woodhead says the market dynamics will allow a broad number of players to succeed in the VoIP game, and that companies relying on the regulator to protect their business plans will be the only losers. He cites Call-Net Enterprises Inc., which, he says, has "relied entirely on re-selling ILEC carrier facilities, who have not built a facility, or, if they have, very few in the last four years." Woodhead argued for a lighter regulatory touch with fewer constraints such as price floors and caps than has been the case, bemoaning at the same time the CRTC’s inaction on Aliant’s forbearance application as EastLink continues to erode the Atlantic Canadian ILEC’s market share. One of the few voices at the summit warning in favour of strong regulatory constraints on Bell Canada’s VoIP offerings was Michael Hennessy, president of the Canadian Cable Telecommunications Association. Hennessy argued that Bell will use its dominant position to crush competition, including from cable companies which, he says have sunk billions into making their networks two-way IP-capable. He said VoIP will be an important competitive weapon in the cablecos’ arsenal to fight off incursions by phone companies into the television market, which have already demonstrated their ability to use bundles of services to compete fiercely in the marketplace. "The $5 long distance plan was the shot to the heart of standalone long distance companies," Hennessy argued – adding that the offer puts cable companies at a disadvantage in the VoIP arena before they even launch service.

Light regulatory approach to VoIP players called for at conference in Toronto

News | December 8, 2004

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