VoIP regulations revive foreign investment debate

Senior executives from the country’s top carriers and cable companies say that while foreign providers of Internet-based phone services will initially serve as niche players in the Canadian local residential market, it will take some time before their offerings are fully adopted.


large segment of Rogers Communications’ customer base isn’t interested in VoIP or digital phones, according to the cable giant’s internal market research. Similar to Videotron Ltee, which launched an Internet-based phone service to 300,000 South Shore residents in Montreal earlier this year, Rogers will offer VoIP as a phone service initially when it launches in July with IP enhancements later, said company vice-president, regulatory, Ken Englehart.

“VoIP service is going to be a niche service initially. It will change as time goes by,” said Englehart, who was one of six panelists attending a roundtable discussion at this year’s Canadian Telecom Summit in Toronto, adding his kids use Skype’s free peer to peer voice service. “As that demographic moves up through the population, it’s all going to change. But it’s going to take some time for that to happen.”

The panel, dubbed, ‘The Regulatory Blockbuster,’ focused on much of the debate between incumbent carriers and cable companies surrounding the CRTC’s recent decision to regulate VoIP similar to other types of phone service currently available in Canada. The decision favours cable companies like Rogers and Shaw as it defines them as competitors and not incumbents like Bell Canada and Telus. Telus and Bell have said they both intend to appeal the CRTC’s decision. Neither company gave an update on the status of their intensions at Tuesday morning’s panel.

While Lawson Hunter, executive vice-president, BCE and Bell Canada, agreed with Englehart, he made reference to his company’s initial stance that the CRTC’s decision is fundamentally wrong in that it protects competitors and not competition.

“We are going to see niche players in this market,” said Lawson. “That again goes to the question of how easy it is for people to contest this market.”

Given that, Michael Hennessy, president of Canadian Cable Telecommunications Association, said a good question for the Telecommunications Policy Review Panel, which has been asked to deliver a final report by year-end, is what the purpose or need for restrictions would be on foreign investment.

“That’s probably something that’s become incredibly outdated,” said Hennessy. “It’s not a requirement on any other country and I’m not sure why we still maintain those matters in Canada.”

The Telecommunications Policy Review Panel was set up by the federal government to take Canada’s telecommunications policy and regulatory framework and make it workable in the 21st century. In order to keep pace with changes in technology, consumer demand and market structure, the three-member panel, which Industry Minister David Emerson appointed in April, will examine and make recommendations on regulation, access and ICT adoption.

Ease of entry by foreign providers, however, was one of the things that Telus found disappointing about the CRTC decision, said company senior vice-president of legal, government and regulatory affairs Janet Yale.

“Here we have foreign-based retailers who are coming in and using the cable and telephony infrastructure with not a penny of investment in Canada having regulatory advantages over the incumbents,” said Yale, adding Internet-based services will primarily appeal to those who want a nomadic type of service. “All you need is an Internet connection and a phone with any numbers you’ve assigned to an Internet address around the world.”

But Jean Brazeau, senior vice-president of regulatory and strategic partnerships at Sprint Canada, pointed out that foreign providers still have to ride off broadband access from carriers like Bell and Rogers.

“I agree with most of people here except question of new entrants will be niche players and the real winners will be the VoIP offered by the incumbents,” said Brazeau.

Unlike Yale, Chris Peirce, senior vice-president of regulatory and government affairs at MTS Allstream, said people should be a little bit concerned that Canada’s policy framework effectively eliminates every major international player. Peirce added with the Call-Net/Rogers deal, these players are essentially gone. Sprint Canada is a subsidiary of former competitive local exchange carrier (CLEC) Call-Net Enterprises, which was recently acquired by Rogers for $330 million.

“We should be embracing competitive services and technology for all-comers,” said Peirce. “That’s what’s going to make Canadian business stronger. We don’t need national champions that are going to hold off other alternatives.”

CLECs like Call-Net built the idea that the Canadian telecom industry should be competitive, chief executive officer Bill Linton said in his keynote address. “Call-Net/Sprint Canada did more than most,” he said.

“CLECs strengthened services to all Canadians. They brought innovations to the telecom industry that were adopted by telcos. All customers have benefited from this competitiveness.”

Similarly, Nortel vice-chairman and CEO Bill Owens called on Western governments, including Canada and the U.S. to put policies in place to encourage competitiveness in the marketplace. “If you build bandwidth, they will come,” said Owens, referring to governments in developing nations like India and Korea that have embraced this notion. “We see a vision at the top of government about what it means to build out a network and provide subsidies. The reality is a nation is going to be more productive.”

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