Cable / Telecom News

OPINION: If you’re going to go VOIP, do it now


IT SEEMS AS THOUGH most people in the industry have this afternoon’s CRTC voice over Internet protocol (VOIP) decision figured out.

Cable companies and telephone companies alike believe the Commission will maintain what it already said it believes: that despite the technology delivering it, VOIP is still just local phone. And that means the incumbent telcos will remain bound by the same traditional regulations they already have to deal with, mainly tariff-filing when they wish to alter their rates, which makes them a slower-moving competitor in the marketplace.

The telcos have done their level best to try to spook the Commission and others in Ottawa with poppycock like saying the CRTC wished to regulate the Internet. Simply not true. But, for reasons I’m about to get into, it’s no wonder the ILECs (incumbent local exchange carriers: i.e. the traditional telcos) have had the rhetoric meter set on silly over the past several months.

Cable companies know what the telcos are going through. In the 1990s they too cranked out the spin about Death Stars killing off Canadian content and such, while they were mainly worried about what satellite TV competition would do to their comfy monopoly and their balance sheet.

The telcos, however, see a far scarier threat than what satellite was – and is – to cable. While satellite TV is great TV, most of its subscriber gains have come in rural areas served by smaller cable companies or from people far from the nearest cable line. And, there are drawbacks to satellite, beginning with the fact that dishes are unattractive things that have to be attached to the home (decide where to put it, get someone to install it, cut tree branches down…) and weather does, in fact, still affect reception.

Voice over Internet telephony though, has no such drawbacks. It’s cheaper, and to the consumer, nothing at all will change. The phone is the phone. It’s easy to switch. And people will, in droves.

Just today Videotron said it has already signed up 23,000 telephony customers (1.6% of its base) in Montreal in just three months after its VOIP launch. Stateside, the numbers are even more compelling. American MSO Cablevision (4.4 million homes passed in the New York Metropolitan area), which launched a VOIP service less than two years ago, already has approximately 300,000 customers, having added over 91,000 in the first quarter of the year alone. Time Warner Cable (10.3 million cable subs), added 152,000 VOIP customers in the first quarter, for a total of 372,000.

Granted, both of these U.S. companies are quite a bit larger than the biggest MSOs here, but the figures show that people will happily take a bundle of digital services from one company, including cheaper telephony.

In fact, according to Toronto research firm Convergence Consulting Group (www.convergenceonline.com), VOIP will grow just as fast, if not more so, here. The company’s most recent research predicts that by the end of 2007, 10% of Canadians will have a VOIP line provided by their cable company.

This is a direct frontal assault on the cash cow of the ILECs. Local phone is what churns all that cash through and out of the likes of Bell Canada, Telus, MTS and Sasktel – and they’re quite desperate to protect it. That’s why all of them are turning to terrestrial digital video delivery now. They need a new growth vehicle as a defense mechanism while cable and others attack local telephony.

What these subscriber numbers also show is that while today’s decision on VOIP might maintain the regulatory status quo (with perhaps a bone or two tossed the telcos’ way), it won’t stay like that for long.

Cable had to wait five years before the two satellite companies took enough customers (5% per market) so that the Commission would then de-regulate cable.

It won’t take near that long for the ILECs to lose a big chunk of their base and for the CRTC to then de-regulate them. In fact, later this year, they’ll all go before the Commission in forbearance hearings, where commissioners will decide what parts of the voice industry to forbear from (to quit) regulating.

It’s been speculated that by the time the results of the forbearance hearings are known – as early as spring 2006 – that Telus and Bell will have lost so many local telephone customers, that the decision will then relieve the incumbents of their regulatory shackles, free to compete on the same terms with all other voice competitors. No more tariffs.

That leaves about a year for voice competitors like Canadian cable companies (big and small) to get their voice services and product bundles entrenched before Bell and Telus and the others swing back, hard.

If you’re going VOIP. Go now.

– Greg O’Brien