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CRTC VoIP Decision

The CRTC announced its decision on VoIP yesterday.  You can read the entire decision here

According to the CRTC, VoIP is telephone service when it connects to the PSTN, and will be regulated as such.  So, VoIP is a tarriffed service in Canada.   One would think that the incumbents would be happy, because the CRTC appears to be preserving their market power.  However, the incumbents are actually furious because the CRTC has decided that, in many cases, VoIP service when provided by companies other than the CLEC/ILEC cartels, should be advantaged. The incumbents may not use their market power to price below cost, either. And, built into the decision is the explicit recognition that P2P services which don’t connect to the PSTN are not considered telephony (the Canadian equivalent of the now famous "Pulver Order" in the US).  (side note: does this mean we won’t get Skype-In in Canada?)

In essence, the CRTC is saying phones are phones, whatever the technology.  However, we (the CRTC) want a competitive market, so some new entrants in the market will be exempt from some classes of regulation.  I mailed with Jeff Pulver this morning, and he said "in the long run the CRTC may have better policy than the FCC.  Scarey"

Service provider revenues, today, are already declining.  The graph below (which I grabbed from an IDC report I use in my business plan), shows the decline of revenues, forecasted out to 2008.  In every class of service provided, with the exception of access, prices are in free fall. 

As an incumbent carrier you’re really stuck between a rock and a hard place.  Prices are falling, due to competition, and the CRTC has said that you can’t underprice your VoIP competition to win back the customers you lose.  In fact, the CRTC’s win-back rules prohibit you from even talking with the customer you lost until 90 days have passed. 

What can you do?  Well, for some time I have believed that the only way the incumbents can prevent the revenue slide from competition is to build better products and services for the market.  Now that the CRTC has removed pricing as a weapon, perhaps a new age of innovation will start in telecom services. Perhaps we will see some of the promise of VoIP finally realized, rather than VoIP being just about cheap, low quality calling. 

For some other views on this decision, check out Jeff Pulver and Jon Arnold.

{ 2 comments… add one }

  • Ronald Gruia May 15, 2005, 10:42 am

    Alec – you make a few very good points. But isn't competition what really drives innovation? And in order to have competition, you have to be able to strike on all fronts, including pricing. Because if one set of players (MSOs) can dictate pricing, whereas another one (ILECs) cannot, then the cause of competition is not well served:
    http://gruia.blogware.com/blog/_archives/2005/5/1

    Also, there is the concept of not regulating an industry before it is born. Michael Powell had a good blueprint for VoIP regulation. Unfortunately, the CRTC did not follow that path. Luckily, there are two commissioners that see VoIP as being something different than traditional telecom service:
    http://gruia.blogware.com/blog/_archives/2005/5/1

  • bda May 16, 2005, 10:02 am

    Now that the CRTC has removed pricing as a weapon, perhaps a new age of innovation will start in telecom services. Perhaps we will see some of the promise of VoIP finally realized, rather than VoIP being just about cheap, low quality calling.

    To the extent the VoIP ruling is nothing more than a minor annoyance to significant market power holders — ie the ILECs — none of this will matter, of course. But to the extent this actually does make a difference to their VoIP plans, and to their ability to hang on to their dominance of the local wireline market, then I think this is exactly right.

    After all, according to the ruling ILECs will be basically unregulated for any offering that doesn't look exactly like conventional PSTN service. If the regulation is as crushing as they make out, you'd think this would be a good opportunity for them to get something new happening.

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