Market convergence puts the squeeze on the CRTC

Growing participation in the voice over IP market in 2004 from both cable and telco operators may put the CRTC between a “”rock and a hard place,”” according to industry experts.

The Canadian Radio-Television Telecommunications Commission is mandated to encourage competition in the telco industry.

The problem facing the CRTC now is the emergence of similar services from both telco companies and cable companies — cable entering the voice market; telco entering the video-on-demand market.

With levels of competition increasing on all sides, the CRTC should be able to take a step back and let the market self-regulate, but it may not be that simple, said Andre Vincent, Deloitte & Touche‘s partner in charge of telecom practice in Canada.

“”The line between Internet activities and the telecoms are becoming so blurry with voice-over IP that they’re going to end up regulating the Bell Canadas and the Teluses of this world and having much, much less impact on cable companies offering the same type of services,”” said Vincent. “”Whether the CRTC wants to move out of that arena or not, they may be forced to by the type of products very, very soon.””

Deloitte & Touche published its Global Telecommunications Operator Survey this week based on interviews from 108 telco executives around the world, 47 of them from North America.

The report states that 85 per cent of respondents regarded government regulation as an impediment to the growth of their industry. Fifty-four per cent said that less government intervention would strengthen their businesses.

In the same report, Deloitte offered this observation: “”Too many incumbents waste time and energy railing against regulatory policy and the (at least partly) competitive markets it has created. The best advice for this group is: ‘Get over it!’ The clock will never be turned back.””

Gartner Group Inc. analyst Elroy Jopling noted that it’s difficult to draw conclusions from a report based on global respondents, but agreed with Vincent’s take on Canada: The CRTC is faced with a conundrum due to the market overlap between telco and cable operators.

The CRTC was betting on the technology to even out the playing field, according to Jopling. Now that it’s happening, “”you will get competition,”” he said. “”But how is the regulator going to play in that game? How much leeway do they give the cable companies? Do they give telcos the same leeway when it comes to video? The CRTC for the last couple of years is between a rock and a hard place. Rather than come up with a long-term strategy, they have come up with short-term Band-Aids.””

But Canadian operators may find it easier to navigate the regulatory waves than their American counterparts. Jopling described the CRTC, compared to its international equivalents, as “”one of the best in opening up the market.”” He pointed out that American companies have to deal with a federal regulator as well as rules particular to each of the 50 states.

The fact that there are four major cable providers in Canada — as opposed to dozens operating in the U.S. — should enable them to compete effectively with the incumbents, said Vincent.

The near future will be about alliances between providers in Canada rather than consolidation, he said. He suggested that there may be a greater level of co-operation between cable operators like Cogeco and Shaw to create an integrated national network. He pointed to the number of co-operative ventures that already exist between telco companies. Allstream and Microcell, for example, recently joined forces to deliver a wireless broadband service some time next year.

Another assertion from the Deloitte report is that “”the playing field that exists today is rife with opportunities for any operator that moves quickly to accommodate new regulatory philosophies and to embrace competition.””

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