The rollout of voice over IP continues to be the next wave of telecom. Bell Canada has unveiled the latest level of its Internet Protocol (IP) strategy while the first announcement of VoIP service by a major cableco has been released. Late last month Shaw Communications Inc. said it would become the first large Canadian cable operator to offer VoIP to its subscribers. Years of activity in the broadband market have given the cablecos the expertise necessary, company president Jim Shaw believes. "Customers want a reliable alternative to their local phone company," he remarked in a conference call on January 20. "Having earned the trust in the high-speed data business, they now see us as a very credible and reliable provider of voice service." He estimated that the company would have to spend in the order of $50-55 million in capex to attract its first 100,000 VoIP customers. Shaw raised the possibility that the cableco would work with other partners, but would not be more specific. He compared that option to how the company rolled out high-speed Internet. It initially used the services of American ISP Excite@Home. Shaw began migrating its customers to its own grid, thereby easing the problems when Excite@Home went belly-up (NL, Dec. 5/01). One day earlier, Bell Canada announced a deal with Cisco Systems Canada to develop a suite of IP services for the business market (NL, Jan. 19/04). Isabelle Courville, president of the enterprise group within Bell, heralded its latest move into IP. "This announcement today is a key building block. We are well underway. We announced before Christmas that we will be moving our network infrastructure on an all-optical transport infrastructure," she told a January 19 news conference. "We announced various applications with various partners but today what I think we’re saying is that we will put the last piece of a big puzzle with Cisco and develop with them the infrastructure that allows the acceleration of the migration to IP." This is the second level of three layers the ILEC is developing for the deployment of IP. The first stage was a three-year, $200-million deal with Nortel Networks Corp. to build a next-gen network using Internet protocol (NL, Sept. 16/03). Courville explained that the final step will be to sign a series of partnership agreements with companies for additional IP applications. On February 2, the company inked a deal with Infonet Services Corp. to deliver services outside of Canada. One firm excited by the prospects for VoIP is Versatel Networks Inc. of Gatineau QC. It is providing products that offer seamless migration across different telephony technologies. Company president Robert Mimeault explains that most equipment on the market today moves signals from time division multiplex, converts the packets into IP and then forwards them to the end user. "We took a different approach. We said let’s make the transport agnostic to the user and build the architecture around that," he tells Network Letter. "So you would be coming in potentially on voice over IP and/or TDM and you’re not sure if you’re going out TDM or IP but you shouldn’t have to configure your switch accordingly." The advantage of such a dual strategy is that carriers can effectively have a PSTN service in addition to an IP service."So if you can offer both, irrespective of the transport medium, and put the smarts at the edge, you’ve suddenly provided the vehicle for someone to say, ‘I’m not going to worry about my transport mechanism, I’m just going to worry about the function I have to do with voice,’" Mimeault adds. There’s no doubt that all the players have stumbled onto a lucrative market segment. At the Bell-Cisco news conference, Cisco Canada president Terry Walsh noted that the IP and virtual private networks sector of the telecom industry is growing three times faster than the rest of the market. He valued the entire market at $5.5 billion. Courville estimated that by 2006, all of Bell’s core network will be IP-based. That will require major spending on the capex side, she admitted. "In the enterprise segment, what we will be doing capex-wise is really to redirect completely our capex envelope from legacy services to the new IP development infrastructure," the Bell executive said. "In December we announced we would be capping investment as of now, so it’s applicable in 2004 on frame and ATM platforms and redirect those investments." It will be a while before Versatel starts negotiating with Bell and other large ILECs. For now, it is concentrating on smaller players."The voice prepaid traffic guys are the first ones we’re targeting. It’s service providers that cater to groups where they’re going to be doing a semi-one-to-one marketing rather than a mass market," Mimeault tells NL. "And the next one you’re going to see us targeting in a big way is conferencing this year, the whole media server conferencing side of the business." Versatel seems to have a firmer grasp on its business plan than Shaw. While Jim Shaw was excited about moving into VoIP, he still left several questions up in the air. One of the largest is where the service will actually be rolled out. "One of the considerations is, is it much better as a large market product or better as a small market product," he asked at his presentation. "If we want to drive it out to the small markets, we’re going to have some transport costs to haul it to Lethbridge and Red Deer and Moose Jaw and those places in the world to ensure service. On the other side, the advantage is the rates are higher there, the long distance region is bigger, and where they call is mainly on net." Shaw will face several advantages and disadvantages as it seeks to enter the telephony market. On the one hand, it will help the firm’s bottom line by promoting its high-speed Internet service. In 2002, Shaw high-speed subscriber growth lagged that of Telus Corp. for the first time. The cableco is also unveiling the service at a time when Telus is more vulnerable than it has been for years. Its quality of service record has been abysmal, with the number of complaints to the CRTC much higher than those for other carriers. Relations between the telco and its unionized workers are poisoned. Negotiations on a new contract have been drawn out and bitter. But Shaw cannot expect to waltz into the marketplace and scoop up disgruntled customers. Many analysts have pointed out that subscribers want a real alternative, not just another large corporate entity offering similar service. Customer dissatisfaction with cable service can be at the same or higher rates as telco complaints. People will not abandon one disliked company to flock to another disliked company.