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.

Fred Wilson has come to the conclusion pre-rolls (ads before a video starts playing) are dead on arrival; while post-rolls (ads played after a video are promising because they're "well targeted and entertaining". He's wrong because its way to early arrive at this conclusion given we're arguably only 11 months into the online video revolution.
To date, pre-rolls have failed to resonate because advertisers are approaching video clips in the same way they approach traditional television. This is misguided because consumers are willing to watch a 15-second or 30-second ad if it's before, during or after a 30-minute or hour-long program. In the online video world where clips last 30 seconds to five minutes, showing a 15 or 30-second ad using a traditional approach before a short video is a disconnect with the medium.
What the advertising industry needs to do is re-calibrate its approach to online video (and pre-rolls and post-rolls) by realizing ads need to be shorter, punchier and more aligned with most video content, which tends to be bubble gum-like entertainment. Look at the way that Rocketboom has made post-rolls part of its modus operandi by creating its own ads, which also tend to be entertaining. The ad industry needs to embrace an edgier and shorter approach to online video spots. They - and Fred Wilson - will discover that pre-rolls work if you do them right.
Note: One more thought about online advertising in general. One of the challenges facing advertisers and advertisers critics is getting their head around the fact it's still early, early days, and there's still an awful lot of experimenting and testing happening. This makes it very difficult to come up with a sweeping generalization about many of the things happening online.

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