December 17, 2004

David Colville's CRTC Departure

With David Colville leaving the CRTC as vice-chair of telecommunications, it raises questions about the Canadian regulator's approach to VOIP. Colville was seen as a bold, progressive administrator who played a key role in the CRTC's decision in 1999 not to regulate New Media on the Internet.

It was seen as a strong signal from the CRTC it would take a hands off approach to the online world, which was in the midst of the dot-com boom. With Colville at the helm, there was some thought the CRTC would let all Internet telephony players compete on a level playing field.

At best, the new players such as Rogers, Primus, Vonage, etc. would be given a small head start to deal with any concerns about Bell, Telus and others from squashing competition before it even got going. If the CRTC adopts this approach, it would let incumbent carriers go head-to-head with a growing number of competitors.

Now, you get the feeling the CRTC may lean on its preliminary view to VOIP - that incumbent carriers should be regulated while cable companies, competitive carriers and new service providers such as Vonage will be free to set their own prices.

While the entry into the market by cablecos such as Rogers and Videotron will give VOIP a jump-start, the market will not take off completely until the incumbent carriers get into it. Not withstanding some bullish forecasts from consultants such as NRI/Michael Sone Associates, I remain skeptical about VOIP's prospects in Canada - at least for the short term.

With relatively low prices - even if you use features such as call-answer and call-display - and cheap long-distance costs (a big selling point of VOIP service providers), local telephony service in Canada is inexpensive for most consumers.

Add on consumers' general satisfaction with circuit-switch local telephony, there appears to be very little impetus or incentive for many people to get on the VOIP bandwagon.

Maybe this will change as the cabecos start to aggressively market their new services as part of bundles, or when the CRTC's price-cap regime, which has kept local service prices low, is changed in 2006, but it's my take VOIP will be far more successful in the U.S. than in Canada.

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