With all the reaction about the CRTC's Internet telephony decision, you would think it prevents ILECs such as Bell and Telus from competing in the market at all. In fact, they can still do business; they just have to file their pricing with the CRTC. And with a new system to accelerate the decision-making process, this isn't as much of a hassle as it was six months ago. It would be a big mistake to under-estimate the brand power and customer loyalty enjoyed by Bell and Telus. As much as people love to hate the telephone company, it's not like they've been fleeing to alternatives such as VOIP or circuit-switch service provided by Primus and Call-Net. As much as it seems counter-intuitive, consumers may very well do business with Bell, Telus, Sasktel and Aliant even if it costs more. There's the convenience of a single bill, the ability to keep same phone number, five 9s reliability, and the comfort of the brand. If consumers always took the cheap route, Dell wouldn't have the market share it has in the PC market, and no-name products such as laundry detergent would have put a huge dent in Proctor & Gamble's business. For a variety of reasons, people seem to be getting carried away with the CRTC's decision. We all need time to step back and reflect on what it really means and what happens next.

The CRTC's decision to regulate ILECs offering VOIP services is already prompting analysts to come out with fall-out scenarios. UBS analyst Jeffrey Fan expects BCE Inc. and Telus Corp. now have 15% to 20% of their revenue and 30% to 35% of their operating profits at risk. "We believe the cablecos will use this opportunity to accelerate their bundle strategy, which will likely improve their market share in internet and cable," he said in a report.
A couple things to keep in mind is how quickly VOIP will be adopted by consumers, and how much it will cost cablecos to win market share. In Canada, VOIP adoption has been slow - partly because local phone service is relatively inexpensive (particularly so if you don't make international LD calls) while QoS is high. As a result, there is no great economic incentive to switch over to VOIP. At the same time, cablecos such as Videotron have to send technicians to each household they hook up for VOIP to install modems and make sure the service works. This is expensive and it puts physical limitations on how many customers they can sign up. These factors may, in fact, work in favor of Bell and Telus by keeping the window of opportunity a little less wide for VOIP rivals until regulatory changes kick in that deregulate the local market entirely - both VOIP and traditional service. The downside of the argument is if competition takes longer to emerge because consumers take time to jump on the VOIP bandwagon, the CRTC may take its time to deregulate the local market.