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Ottawa pulls plug on VoIP regulation
2006-11-16
Minister of Industry Maxime Bernier announced at an Economic Club of Toronto luncheon Wednesday that Voice over Internet Protocol services — landline phones offered over a broadband connection — would no longer be regulated.
"Barriers to entry in this market are low; there is no reason to regulate it," he said. "In a competitive sector, there is no reason to regulate some companies while others can offer the services they want at the prices they want."
Under previous restrictions, incumbent phone carriers such as Bell Canada Enterprises Inc. were limited to how low they could price their own VoIP services to compete with specialized providers such as Vonage Canada Inc. With the deregulation, all VoIP providers will be able to price their services as they see fit.
A spokesman for the Canadian Radio Telecommunications Commission said the deregulation will take effect immediately, and the regulator will issue a circular today to address how it will be implemented.
Some incumbents, including Bell and SaskTel, offer VoIP services but don’t actively promote them. Industry observers expect that to change
as VoIP is much cheaper for them to provide. The result could be cheaper phone services for consumers and less cost to the phone companies, although they will end up competing with their own traditional offerings.
"It’s a good news, bad news thing for them," said Greg O’Brien, author of industry newsletter CARTT and an expert on telecommunications regulation. "They’ll be able to market freely like the cable companies do, but at the same time they’ll end up undercutting their own traditional wireline service."
The government’s decision did sow some confusion, however, by specifying that only "access-independent" VoIP services would be deregulated. Some industry players were not sure what that definition would cover.
"There are definitional issues about what access-dependent services are, when they’re VoIP and when they’re telephony," said Lawson Hunter, executive vice-president and chief corporate officer of Bell Canada.
Joe Parent, vice-president of marketing and business development for Vonage Canada, said it was too early to tell how the move would affect the phone market.
"While deregulation does open up greater competition, it also opens up the possibility of abuse of market power."
Mr. Bernier said the decision did not affect traditional phone services, but he made clear the government was looking to deregulate that market as well.
"It’s a small step, but it’s a step," he said.
The government’s overturning of a decision by the Canadian Radio Telecommunications Commission is a rarity. The CRTC last year decided that VoIP should be regulated like a regular phone service, but the government in May asked it to reconsider. The commission stuck to its guns in September and announced its decision stood.
Mr. Bernier said the Conservatives would stick to the key finding of the Liberal government-initiated Telecommunications Policy Review Panel, which was issued in March. The review urged that rather than assuming all telecommunications services should start out regulated, they should only be governed when the need arises. As such, the panel said, the CRTC should have a more reactive role, rather than proactive.
"We want it to regulate only when necessary," Mr. Bernier said. "And when regulation is necessary, we want to ensure that it interferes in the least way possible with market forces."
Some industry observers said the reversal of the CRTC decision does not bode well for the future of the regulator.
"The CRTC has one knee down ... they might be gone within three years," said John Ruffolo, national leader for Deloitte's technology, media and telecommunications practice.
Financial Post
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