THE TECHNOLOGY IS the easy part. Everything else is maybe just a bit frustrating.
The regulatory landscape for voice over Internet protocol, Vonage Canada’s raison d’etre, may be changing underfoot and the company has had its share of scrapes with incumbent telcos and cable companies. A particularly bitter one with Shaw Communications is still active in the courts and in front of the Commission, as we’ve reported.
Through it all, Vonage’s chief Canadian executive, president Bill Rainey, seems pretty upbeat. The former Group Telecom and Telus executive and manager is convinced he can beat the bundle being offered by telecom and cable companies with customers service, a low price and new services like its WiFi phone that will work in any hotspot and key-chain V-Phone – which is really a memory stick that makes any laptop anywhere into a customer’s local phone.
Recently, Rainey (pictured) chatted with Cartt.ca editor and publisher Greg O’Brien. What follows is an edited transcript.
Greg O’Brien: Are you pleased with the progress you’ve made so far?
Bill Rainey: We’re very pleased. We’re meeting the objectives that we set. We believe that there’s a thriving voice business in Canada, and we’re part of it.
GOB: Can you divulge any subscriber numbers for Canada?
BR: That’s one thing we don’t do. We share all of our numbers on a global basis and have not split that out by country as we’ve grown into different countries which right now are Canada and the UK.
GOB: So what is it on a global basis now?
BR: 1.7 million – which is the largest in North America and, as far as we understand, the largest in the world, customer-wise (for a VOIP company).
GOB: How does this company compare to the other telecom companies you worked for?
BR: The one big, big difference is the speed that we’re moving at. You’ve got very innovative new technology. You have been able to hire people from the bottom up who really want to be able to achieve your vision… which is to deliver the Vonage Canada experience.
What that means is taking service to an experiential level – which has not existed in telecom.
GOB: Meaning?
It would be the kind of service that you would have seen if you go to a Starbucks or to BMW or Mercedes. You don’t go to Starbucks for a cup of coffee. You can get a dollar cup of coffee at the end of the block. You go to Starbucks for the experience. You love the people. You love the service, the product. It’s different. It’s proactive. Those kinds of things.
So what we want to build in Canada is a new benchmark of customer service at that an experiential level and we are well on our way to doing that.
GOB: Now, is that your major focus then – in fighting back against the bundling capabilities of the other companies and of the incumbents?
BR: Oh, no… Clearly, setting a new benchmark of service is a critical one. Hopefully that’s new space, because nobody else is going to be doing that. We get good service in Canada (from existing telecom players), but we do not get great service. But there are a whole lot of other things. Clearly, insuring that the service we provide is differentiated, and not everybody has the feature set or capability that we have.
When you start looking at the breadth of virtual numbers, the ease-of-use of the web account to take control and manage everything, we believe that that kind of innovation, and adding on to it as we grow with other IP based services – we build a bundle the way a bundle should be built. And it is not an aggregation of things or services that you happen to have that don’t necessarily fit together – you know, high speed and phone and all those different things: TV and telephone that the cable companies have aren’t necessarily perfect partners.
Instead of putting together what is a really a billing bundle where they put all of these services together on a bill for you – we’re coming at it the other way and saying, “Forget the bill. We’re going to put real services together in an IP-based bundle." So, that would clearly include voice over IP. And our entry now with the Wi-Fi phone into the wireless world is IP-based. Portability with our V phone is another, and we’ve made announcements publicly that we are looking at a number of other IP-based initiatives – instant messaging being one.
GOB: Tell me a little bit more about the Wi-Fi phone – how it works and how it is being accepted in the marketplace.
BR: Well, we just launched, but did a tremendous amount of research and what customers are saying is they want choice. They want choice in wireless no different than their choice in wireline. So with Vonage and our service being agnostic (from a technical and service point of view) – as long as it’s high-speed, it doesn’t matter what kind of high-speed. It’s agnostic as well with the device. And it’s a natural to go from wireline to wireless and start that journey into the wireless world with hotspots.
Anywhere there may be a hot spot, whether it’s in your home with a router, whether it’s in your office, whether you’re in an airport or a Starbucks or in any place that may have a high-speed wireless capability, you can now use a Wi-Fi phone and then be able to pretty much mitigate roaming charges, long-distance calling on a cell phone. You’re getting exactly the same benefits as you would with wireline service and exactly the same kind of low flat rate plan but all the features built-in
GOB: So your home phone can be anywhere there’s a hotspot, right?
BR: That’s exactly it, and now that we’ve got companies like Toronto Hydro, (which) is taking the idea of Philadelphia to turn Toronto into a hotspot. We are going to see more and more and more of that. It’s going to proliferate throughout North America, as it already is in Europe. And, we’re going to have this wonderful wireless network that’s out there that will be more than just WiFi, which is usually about 100, 120 feet before you lose the signal.
We are going to get Wi-Max soon and Bell and Rogers have announced their Inukshuk network, which will start to cover the country over the next 12 to 24 months. And now we’ve got something that’s really makes WiFi a very strong alternative to cellular.
GOB: So if I see anybody chatting on the phone constantly outside my office, they could be on one of my wireless routers, I guess.
BR: You can see the power when you’re device agnostic. It doesn’t really matter what device to use or what access to use, as long as you can use an application that’s IP based.
Obviously there will be a smaller market at first. The lion’s share of cellular calls – and the number I’ve heard is anywhere from 50% to 80%, so I don’t know which one is true yet, but call it significant – are answered either in your office or your home.
People call you but if you’ve got a wireless capability, why not use a WiFi application, save yourself a whole lot of money, and add lots of good features?
GOB: The big cable and telcos are working toward that as well.
BR: Exactly. And one of the things that the manufacturers have done is they’ve been looking at dual-mode phones where you can get WiFi and cellular with a seamless transfer. Everybody’s been testing them. There will come a point in time, probably next year, where most companies become comfortable that it’s time to launch and then that becomes a real serious alternative to cellular and whenever you need to roam or do any kind of long-distance call, you just flip it onto WiFi.
GOB: Right. Now, given the number of cable company entrants in the telephony market, and the fact the traditional telcos are going to voice over IP, and then there are companies like BabyTel and Primus and ComWave and a bunch of others, is there enough of a market for all these players? Who’s going to emerge as the winner?
BR: There’s always room for more, because there can be nothing better than strong competition and lots of choice for the customer. Yes, the more you get, some may not survive. I think the companies that will survive are the ones that are going to be aggressive innovators and are going to have the best customer service. And at this point for the telephone companies, it’s quite clear that they are not being aggressive, because they don’t want to cannibalize their base and everyone understands that.
If anything, it’s been a defensive strategy, and even with that, Telus still hasn’t launched a product, nor has Aliant.
And Bell has been very slow, even in Québec, where Videotron has been strong. So there’s no question that your independent companies like Vonage will survive… and I think you’ll find that the cable companies, of course, will be very strong because everything is upside for them.
GOB: How important is price? Is it the number one consideration?
BR: No. If you talk to our customers, they will tell you ease of doing business with the company and getting really great service from that company is more important than price.
But they will tell you that price is the ante to play the game. So if you’re not in the ballpark with reasonable pricing that adds a lot of value, then your overall value proposition isn’t going to cut it.
So yes, price is important, but it is not the number one thing that is going to bring a customer to Vonage. And if you look at some companies that are out there that have slashed their prices rock-bottom, their bases are not growing as fast as they would like them to because there’s a heck of a lot more to it than just how cheap something is. Cheap doesn’t mean good.
GOB: Now, when it comes to cheap, you could say that Skype has the lead there. So, when you’re confronted by customers who, perhaps don’t know the difference, what’s the message you have for them?
BR: A few things. The easy answer is we aren’t Skype. Skype is a computer-to-computer capability which is okay for certain applications, but 99% of consumers aren’t going to make most of their voice calls that way.
There is a market for that, but it’s limited to tech-savvy type people that spend a lot of time at the computer. You know, kids, and whatever. What we say us we’ve make the full meal deal happen, so that you get A to Z, all the capabilities, features, all the pieces. It is not linked to your computer. In fact, quite the opposite.
GOB: With the Commission having to revisit the VOIP decision, as mandated by the government, what has Vonage told the Commission as they reconsider it?
BR: We were in Ottawa just last week and when we spoke with the CRTC, we believe very strongly in a fair, open, competitive, deregulated marketplace. We’ve said that from the day we came here, which was October 2004. That said, to get to that world where it is fair, open, and deregulated we want to make sure there’s a mechanism that can manage potential abuse of market power. And that’s specifically looking at the telephone companies who may, on occasion, knowingly or unknowingly, abuse their market position. And if that’s the case, then we believe there needs to be a mechanism to address it.
It was Vonage that brought commercialized VOIP to North America. It wasn’t the telephone company. We want to make sure that competition in Canada, especially with small business, which everyone says is the engine of our economy, that innovation flourishes, and it will not if market power wins over and rushes that innovation or those of small companies. So we are totally in support – we just want to make sure that there’s a proper time frame and the proper mechanism to get there.
We believe that the CRTC got it right.
GOB: When reading through the telecom policy report, it has a lot to say about significant market power.
BR: Exactly… and we’ve got quite an ideological government that’s come into play, which is fine as long as they understand that to get to the deregulated world that they are saying they want right away, it may take just a little bit longer. We’re not talking five years and we’re not talking a month. But somewhere, over the next couple of years, there has to be a transition that makes sure that competition is sustainable.
GOB: Reading through the telecom policy report as I have, as well as the Commission’s decisions, you could make a case that the CRTC has already done what the policy report asks. The Commission has already considered significant market power with their decisions on VOIP and local forbearance.
BR: We believe they have. They’ve taken a very, very complex thing and been able to sew all the pieces together. You can’t just say, “Oh, we need to be deregulated today,” when there are all these other things that are hooked together. So, we believe the Commission does have it right.
Can it be made any better? Maybe. But what we want to make sure happens – which is why we were in Ottawa last week – is that the opinions and views of smaller independent companies like Vonage and many others are heard, because right now there’s a big regulatory battle going on with lots of lobbying from the likes of Bell – spending lots of money and time going after cabinet and the CRTC instead of worrying about things like innovation and customer service.
GOB: I’m also curious where the situation with Shaw stands.
BR: Because there is a legal proceeding in progress I can’t say too much about it. But one thing I will say is that the reason this all started is simply because our customers came to us over a $10 fee and asked us: "why do we need to pay this?"
"Am I going to see any different service? Will it get better? Will it get worse? My service is running perfectly as it is." All Vonage did was ask Shaw could you please explain what this is? That is all we ever said, over and over again: "Could you please simply explain what this charge is?" And to this point, nobody has received an answer.
So, we’re then left in a position that we have really nowhere else to go but to escalate it to say, if you are not telling us or our customers why you are charging $10, then we have to believe that you are doing this in some form of an anti-competitive manner… and that gives customers a lesser reason to move. Or, there truly is something in your network, in your quality of service that is worth $10. And if that’s the case, that would be on a very thin regulatory line.
GOB: The $10 is an optional fee, though.
BR: It is an optional fee, but the mere fact that you bring it up, makes everybody think that something’s wrong and that is, in our view, anti-competitive behavior when there is absolutely nothing wrong.
GOB: There have been a few other complainers out there, I guess is the best way to term them, that Vonage isn’t a facilities-based competitor, that you are trying to get a free ride off of the telco or the cable backbone. What’s your comeback to those folks?
BR: Well, there’s very few of them and most of that has died down. It’s an easy attack because voice over IP is a technology that does not require that you build facilities. You can run over the Internet globally. So knowing that, it gives us a business model that is quite attractive in comparison to some facilities-based, in fact all facilities-based organizations.
That said, we don’t believe there is a free ride, or as (VOIP providers) were called by Mr. Sabia (Bell Canada Enterprises CEO Michael), a parasite. Not at all, because we may be called that on one side, but on the other side, the amount of money that we pay to Bell and to other carriers every single month, makes us one of their fastest growing customers on the whole field of play. Welcome to telecommunications. There’s a kiss on the cheek on one side, and kick on the other.
So that is really it. It’s a public-relations battle there.
GOB: You’ve got customers, and at some point you’ve got to connect with the public switched telephone network, right, meaning fees?
BR: And the carriers are very quick to say, “Can I have your business? Can I have your business?” And we say, “Sure.” And then a second that they’ve got it, there’s a complaint on the other side, “Oh, you’re parasites. It’s free. The cost of entry is cheap.” Well, the cost of entry is not cheap. It’s less expensive on the network side and that’s technology-driven. But it’s much more expensive for us to acquire a customer than it is for a telephone company, or a cable company, that can send an e-mail to two million customers and get 2% of them to sign up for their new phone service overnight, just because they’re there.
For us, expensive advertising is a lot harder to do. So if somebody would like to go start a VOIP company right now, go for it. It’s not nearly as easy as people think. We happen to be very good at it, but the cost of entry is nowhere near what is being portrayed.
GOB: When it comes to net neutrality, where does the definition of network-management stop and where does interference start? Certainly everyone would be in agreement that a 911 call has higher importance than anything else on a network. So where do you see the net neutrality argument right now in that light?
BR: We believe that the Internet should be open to everybody the way it is today and that you cannot create a two-tiered society. It’s not fair. It’s not safe. It’s not good business. It’s all about what the customer needs and if we get into a world where it’s tiered, then you’ve got, in essence, monopolies again, going back and restricting who gets this access or who gets that access.
And if that starts to happen, one of the first things we wanted to do, which is to drive competition that was sustainable, isn’t going to happen because over time that will drive competition out and it will come back to a duopoly of Bell and Rogers.
I don’t think that’s what anybody that I’ve ever talked to really wants.
GOB: The net neutrality debate seems to be a little more front and center in the States than it is here.
BR: Yeah. We’ve tried to really kick it up here. I mean, that’s exactly the flag we wrapped ourselves in what we talked to Shaw. That’s really what it comes down to. Leave it open. Don’t control it. In the States, it went through Congress and the Senate that, at this point, it was up to the carriers, and that they would not have net neutrality.
And that’s not over. It’s just beginning.
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