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Should VoIP be Unregulated?

According to a recent Ipsos-Reid survey 75% of Canadians believe that VoIP should be unregulated.  The teaser factoids published by Ipsos include:

  • Ninety-four percent agree that all VOIP service providers, including established telephone companies like Bell Canada, Aliant, SaskTel, Télébec, and TELUS, should be subject to the same regulatory rules (38% believe this strongly).
  • Three-quarters (75%) believe traditional telephone companies should be allowed to compete and offer lower prices for VOIP services than their competitors if they want to, without interference from the CRTC.
  • Six in ten (62%) agree that forcing only traditional telephone companies to submit their prices for VOIP services in advance to the CRTC and wait for approval is an unfair restriction on their ability to compete.
  • Two-thirds (68%) agree that traditional telephone companies should be free to provide bundles of communications services that include VOIP service without first having to obtain the CRTC’s approval – just as their competitors are able to do.

So, the war is on.  Public opinion (at least, as recorded by the self-serving poll commissioned by Bell Canada, Aliant Telecom Inc., Saskatchewan Telecommunications, Télébec, société en commandite, and TELUS Communications Inc) is in favour of a relaxed regulatory regime.  This is at odds with the CRTC, who apparently believes that unless public policy is used as a tool to force change, incumbent monopolies will stifle change.  The day after the poll results, these companies appealed to the Federal Cabinet.  

Does regulation really matter?  BCE’s Q2 report is garnering praise, but within the report (see the table on page 22) the numbers tell a story of a declining wireline and long distance business, shored up by stellar cellular, TV, and ISP businesses. It’s this wireline business that unregulated VoIP providers are attacking. 

During the period, total subscriber lines declined by 1.8%.  Local Access Revenues declined by 1.6% as revenues from SmartTouch Services (call waiting and the like) declined but were partially offset by gains from "wireline insurance and maintenance plans", rather than innovative new services.  And, although long distance minutes increased by 3.8%, revenue decreased by a staggering 10.4% due to competitive pressures.

Moreover, the decline seems to be accelerating, year over year.  2000 was the peak for Bell subscriber lines, and subscriber line revenues.  A quick check back to previous years shows the subscriber line trend as:

  Q2 05 Q1 05 2004 2003 2002 2001
Subscribers (000’s)  12,700  12,845  12,905  13,051  13,154  13,339
Percent Decline 1.1% 0.5% 1.1% 0.8% 1.4% 0.2%

Prior to this year, they had never lost more than 1.4% of subscriber lines in a single year.  However, in the first two quarters of this year, subscribers are down 1.6%.

Perhaps the CRTC is incorrect.  Perhaps the market is behaving as one would expect.  Wireline voice, while an important part of the Bell portfolio, is clearly in decline.  A price war with competitors will simply accelerate that decline.  Therefore, if Bell wishes to stay in the local access business, they must find compelling new products to replace the aging SmartTouch suite.

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