It appears to be a mixed bag for Canadian ILECs when it comes to the erosion of their local telephone business in Q1. Bell Canada lost 172,000 lines due to wireless substitution, the surrender of second lines as customers moved to high-speed Internet service, and the competitive impact of CLECs. Videotron Ltee was a key factor after it launched cable telephony service in Montreal in February. Analysts believe Videotron has 15K to 20K customers. In Eastern Canada, Aliant Inc. lost less than 6K customers, which is not bad given it is competing against Eastlink Communications in Nova Scotia. In Western Canada, Telus Corp.'s local business dropped by 10K lines. CEO Darren Entwistle seemed blase - describing VOIP as a nascent service. We'll see how long he maintains this attitude as Shaw Communications moves into more large cities in Alberta and B.C.
For people looking for insight into how ILECs will be affected by cable telephony, Bell's experience could be the most telling. With Videotron offering telephony for as little as $15 a month, Bell is starting to suffer. Telus, however, has yet to see a big impact because Shaw is taking the high road with a $55 a month service - something that only appeals to the bleeding edge and people who really, really dislike Telus. The real test for Bell will be Rogers Communications' move into telephony this July. Depending on how Rogers decides to price the service, Bell could take a huge hit, particularly from the 250,000 Rogers' triple-play customers who may have a compelling economic incentive to sign up for the quadruple play.