With the Canadian government intent on de-regulating the country's $10-billion local telephone market and giving the incumbent carriers the freedom to set their own prices, it will be interesting to see the impact this decision will have on Canada's VoIP marketplace. To be perfectly frank, VoIP hasn't been overly successful in Canada. By this, I mean Real VoIP with all the bells and whistles that a Web-based service can offer. What Videotron and Rogers are offering right now is VoIP-lite because it's just plain old telephone service (POTS) with none of the online frills such as voice-mail to e-mail that rivals such as Vonage, Primus and BabyTel are offering.

Perhaps the reason the cablecos haven't rolled out the value-added features that makes VoIP such a compelling proposition is they haven't been compelled to do it yet. With the carriers being regulated in the local market and an unwillingness to become more aggressive with VoIP until the rules became more clear, the cablecos have been able to get away being an alternative option to attract consumers. In Quebec, Videotron has used ultra-low prices if you have a multi-service bundle, while Rogers and Shaw have been content to pick off customers pissed off with Bell and Telus respectively.

But what happens if Bell and Telus suddenly get more aggressive with their phone prices (both traditional and VoIP) to win back customers who may have strayed to the cablecos, Vonage, etc.? And what happens if Bell really starts to push Bell Digital Voice as a premium, multi-feature VoIP service, while cutting prices on traditional local service? This could become a strategic conundrum for the cablecos because they would have to determine whether to compete on price against traditional service, which looks and smells the same as cable telephone service provided by Rogers and Videotron. Or do the cablecos go upstream and go head to head with Bell Digital Voice by adding all the Web-based features of Real VoIP.

If I had to guess, the cablecos will go the premium route because it fits into their focus/obsession with disciplined pricing and ARPU. If this materializes, it would be terrific for VoIP and customers who want Real VoIP because the cablecos and carriers will have to compete on features and services - much like they do in the high-speed Internet access market where both sides are intent to increase speed and add more features as opposed to - heaven forbid! - drop prices.

Technorati Tags: VoIP

The deregulation of Canada's $10-billion local telephone market took a big-time move forward today when the federal government unveiled a new structure that will let incumbent carriers set prices however they wish to compete against new and fast-growing rivals such as the cablecos (Rogers, Shaw, Videotron, Cogeco, Eastlink, etc.) and independents such as Vonage.

The decision overturns a CRTC ruling earlier this year that stipulated carriers couldn't have competitive freedom in a particular market until they lost 25% of the market. This decision was badly flawed because it failed to take into account wireless customers - many of whom don't have a local line - and the reality cablecos could pick off the carriers' best customers to the point where they could have 30% or 40% of total market revenue while still staying under the 25% market share threshold (based on customers).

So what does it mean? For carriers such as Bell and Telus, they will now have much more freedom in markets where there is another facilities-based network (aka a cable network) to use price as a competitive weapon to retain and attract customers. Of course, carriers are scrambling to grow/maintain revenue so they may be somewhat reluctant to reduce prices. Then again, when Videotron is winning major amounts of market share in Quebec with prices as low as $16.95 a month, Bell may have little choice but to fight on price.

Nevertheless, the decision will level the competitive playing field between the carriers and cablecos. The winners could be consumers IF a price war breaks out (that's a big if given the cablecos have embraced pricing "discipline" in the VoIP and wireless markets). You have to remember local phone service is seen as the key element within a consumer bundle so if you have/can keep a local phone customer, you'll likely be able to sell them lots of other services.

Now, let the games begin!

More thoughts: You can argue until the cows come home whether there is healthy competition within the local market, and whether the non-carrier players will be able to survive/thrive now that Bell, Telus, et al have more pricing freedom. Truth be told, the cablecos are well armed for battle so there's no reason not to let true competition happen. Who knows, maybe competition will lead to benefits other than lower prices such as new, innovative services as the cablecos, carriers and others battle for customers. For other thoughts, check out Mark Goldberg.

The University of Toronto's Citizen Lab will make free software available later this week that will help people deal with Web censorship issues in countries where access is restricted or limited. A downloadable tool, called psiphon, can transform anyone's personal computer into encrypted servers (or access points) that can access blocked sites and associated Web pages. People who want to access these sites connect to a psiphon server or psiphonode by logging in through an encrypted connection and using it as a proxy. The user does not have to install any software on their machine. The technology was created by the Citizen Lab at the University of Toronto's Munk Centre for International Studies, as part of an Open Society Institute-funded project. The psiphone Web site is here - with free downloads available on Dec. 1. A New York Times story on the psiphon software can be found here.
Update: A comment (see below) raised an interesting point that the UoT is trying to fight Web censorship while a group of Canadian ISPs and Cybertip.ca introduced a plan last week to block Web access (specifically child pornography). If anything, it makes for a fascinating discussion on the right approach, who gets to do it and why.

In a decision that will dramatically change the $10-billion local phone market in Canada, the federal government has decided the VoIP market should be regulation-free. "Barriers to entry in this market are low; there is no reason to regulate it," Industry Minister Maxime Bernier said. "In a competitive sector, there is no reason to regulate some companies while others can offer the services they want at the prices they want."
   So what does this decision mean? For one, incumbent carriers will be able to offer VoIP service at any price they want without having to seek approval regulatory approval. As a result, you can expect Bell Canada to become much more aggressive on pricing while ILECs such as Telus, Manitoba Tel and SaskTel will get into the VoIP market after sitting on the sideline until the regulatory uncertainty was resolved. This could mean bad news for Vonage and the cablecos, which have been able to roll out VoIP service without having to worry about competition from the ILECs.
  Another key development is regulation of the traditional local phone market will likely disappear soon (expect in rural communities where there is little or no competition). After all, how can you deregulate VoIP and not deregulate traditional phone service? Depending on how aggressive the ILECs want to be to keep and win-back customers, it would not be surprising to see price wars for local phone service in many markets, particularly places such as Toronto and Montreal where the ILECs, cablecos and VoIP service providers are already going to head to head.
  One wildcard is how ambitious the ILECs will become about VoIP given they could easily cannibalize their traditional phone businesses, particularly high-end customers who would gravitate to VoIP because of the features. If the ILECs do come out with guns ablazin' it may be bad news for the cablecos, who have been enjoying free ride with cable telephony, and the VoIP players such as Vonage who may find themselves on the outside looking in.
Tags: VoIP, Canada, CRTC

While the Net Neutrality has raged in the U.S., it's been quiet in Canada....until now. Yesterday, Videotron CEO Robert Depatie said the federal government should levy a "transmission tariff" on content providers so they can support the cost of building and maintaining networks. "If the movie studio were to mail a DVD . . . they would expect to pay postage or courier fees,” he told Canadian Press. "Why should they not expect a transmission tariff?". Depatie said he also concerned "Canada lags behind in pricing competitives and technology because the regulatory regime discriminates against new providers like Videotron". If there was ever a public shot across the bow of the federal government and telecom regulator, Depatie just delivered a one-two punch. In a sense, his move is a positive because it could compel the CRTC (Canada's telecom and media regulator) to finally get involved in the Net Neutrality issue/controversy. So far, the CRTC's standard response to inquiries about Net Neutrality is it won't act until it receives a complaint, which is hardly pro-active or forward-thinking. It is somewhat interesting to see a cableco push forward the Net Neutrality issue given it's the carriers who are losing customers and revenue as cablecos get deeper in the local telephone business. Then again, the cablecos are being forced to make large investments in their networks to stay competitive with increasingly-desperate carriers so the interest in external "help" is hardly a surprise. As for Depatie's contention the CRTC discrimminates against providers such as Videotron, that's just off-base given Canadian cablecos are barely regulated while carriers are still in regulatory shackles. I wonder my what my friend, Mark Goldberg, thinks about Depatie's comments.For more, check out Rob Hyndman, who describes some of Depatie's statements as "bizarre", and Michael Geist, who runs with the Net Neutrality theme.