Incumbent telephone companies were dealt a blow by the Canadian Radio-television and Telecommunications Commission as the regulator decided to stick with the original ruling on voice-over-IP that it made over a year ago.

Lawson Hunter, executive vice-president and chief corporate officer at Bell Canada, said the next step is to wait and see what the government does.

“It’s astonishing that in light of the direction that Cabinet gave them that they came back and did nothing, particularly in light of the fact that every other industrialized country in the world doesn’t regulate VoIP, and yet they can’t seem to figure out how to do that,” said Hunter.

Ken Engelhart, vice-president of regulatory affairs for Rogers Wireless, Cable and Media, said the company has mixed feelings about the CRTC’s decision.

“The good news is the CRTC has maintained their VoIP decision but the bad news is that they’re reviewing the forebearance decision just a few short months after it was issued,” he said. “That’s a bit disappointing and creates uncertainty for us.”

The CRTC’s decision re-affirmed its original position to treat VoIP as a telephone service but also recognized that competition in local telephone service is taking hold more firmly than anticipated.

To address this, the Commission said it will reassess a decision it made in April on forebearance in which incumbent local exchange carriers (ILECs) must lose 25 per cent market share in order to operate without interference from the regulator. The CRTC will also review the winback rule that applies to major phone companies, which currently states that the companies must lose 20 per cent market share before they can try to get customers back.

“This is now twice in four-and-a-half months that the Commission has started a process due to problems with their own forebearance decision,” said Hunter. “They didn’t get it right then. They’ve admitted they’ve got it wrong twice.”

He added the CRTC should not use market share figures to judge whether a market is competitive.

“It’s more a question of choice than it is of market share,” he said. “There’s lots of choice for consumers. Hopefully, the (CRTC) will get away from market share altogether, but that doesn’t sound like what they want to do.”

Vendors are starting to ship 10 Gigabit Ethernet switches for copper cabling, and Infonetics Research predicts the total 10 Gigabit switch market, when measured by ports shipped, will grow 74 per cent per year until 2009.

Revenues for 10 Gigabit switches are expected to grow at 30 per cent per year until 2009, said Matthias Machowinski, directing analyst for enterprise voice and data at Infonetics.

Revenues will grow more slowly than units shipped because prices are declining, Machowinski said, adding that 10 Gigabit switches comprised six per cent of the total market, when measured by ports shipped, while Gigabit accounted for 61 per cent of the total market.

Campbell, Calif.-based Infonetics predicts the Gigabit Ethernet switch market will grow at 26 per cent per year when measured by units shipped, and at eight per cent per year when measured by revenues.

“The average user probably doesn’t need Gigabit to the desktop,” he said, adding that many companies are upgrading to Gigabit Ethernet anyway because they predict users may need Gigabit speeds at their PCs in a few years.

The “de facto” speed for desktop switches is still 100 Mbps, said Seamus Crehan, director of Dell’Oro Group, a Redwood City, Calif.-based market research firm.

“Users don’t need Gigabit to the desktop today, but they may need something greater than Fast Ethernet over the next four years or so,” he said.

According to a recent Dell’Oro report, equipment manufacturers earned US$302 million from 10 Gigabit Ethernet switch sales during the second quarter of 2006.

Vendors shipped a total of 65,000 10 Gigabit ports during the second quarter, a 25 per cent increase from the previous quarter, Crehan said.

The vast majority of 10 Gigabit networks use fibre instead of copper cabling, and the price per port of 10 Gigabit switches has dropped drastically since the technology was introduced five years ago, Crehan said.

Toronto Hydro Telecom has launched its downtown Wi-Fi service with pricing it claims is 35 per cent below the average for high-speed Internet service in the city.

The first area to go live is Toronto’s financial district. Four other areas will be switched on before the end of this year. The service, dubbed “One Zone” will be free until March of 2007. After that, three pricing packages will be available: a pre-paid monthly subscription rate of $29; a 24-hour rate of $10; and an hourly fee of $5.

The pricing plan is based on the usage patterns of its potential audience: permanent users, occasional users and visitors to the city. Toronto Hydro Telecom president David Dobbin said, “we have a wide pool of users available to us,” but admitted the key to the service’s financial success will be the number of business customers it can win.

Dobbin said the pricing is competitive with existing rates for high-speed Internet service.

“You don’t have to pay an additional charge. The service follows you wherever you go,” he said during a press conference held last month at the Toronto Stock Exchange.

Gartner Canada telecommunications analyst Elroy Jopling called the rates “(not) bad, but they’re not great. I think that’s the thing that jumps out.”

Jopling said he was surprised that Toronto Hydro Telecom didn’t take the opportunity to set its rates significantly below that of its competition.

“If you’re a new kid on the block, or you’re late coming onto the block, I think you have to bring something more,” he said.

The Toronto wireless hot zone has come across a number of obstacles since the project was first announced in March. Originally, the service was to have gone live in June, but there were problems with the street light poles that were used to attach antennas. There were also concerns from police that the service could be used for drug trafficking communications and other illegal purposes.

Despite the delays, Dobbin said Toronto is the first major North American city to get its Wi-Fi service off the ground. Similar initiatives in San Francisco and Philadelphia are still in planning or implementation stages.

Toronto Hydro Telecom is also in talks with the City of Toronto to use the network for municipal services, such as parking meters, vehicle management systems and surveillance for law enforcement. “Those will unfold over time,” Toronto mayor David Miller said.

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