The long-anticipated entry of Rogers Communications Inc. into the local telephony market hinges on the development of an appropriate regulatory environment, company officials say. The cableco announced February 12 that it plans to begin rolling out local residential service across its network by mid-2005, with full deployment the following year. Rogers has made similar pronouncements in the past, but this appears to be the real deal."We’ve said for a long time that to get into this business the model would have to be technologically feasible, economically viable and be supported by a reasonable regulatory structure," president/CEO Ted Rogers told a conference call. The company will deliver telephony over its DOCSIS cable network, a technology the development of which Rogers has supported for years. The phone service will be equipped with directory assistance, caller ID, 911, call waiting and other services, features that are not available on the products offered by other VoIP players. The Rogers phone will also have back-up powering, thus eliminating a major flaw in the other VoIP systems. The cableco says fixed capital costs for deploying the service will be around $200 million, with the bulk of that being spent this year. It estimates the costs of adding each new subscriber will be in the range of $300 to $340 per customer. While many telecom analysts have been sceptical of Rogers’ previous claims that it was prepared to go into local service, they are taking this one seriously. One veteran observer says Rogers is attacking and defending at the same time. "There is quite clearly a pretty enticing market opportunity that’s there for a couple of reasons," Mark Quigley, research director for The Yankee Group, tells Network Letter. "There’s the revenue opportunity it represents. The second thing, of course, is it also represents an interesting defensive opportunity from the point of view of keeping the TV over DSL threat at bay, keeping ExpressVu a little off balance." Although Quigley is excited by the prospect of greater competition in the local telephony sector, he concedes that Rogers will have to work hard to win market share. People are not going to randomly abandon one large conglomerate for another. "There has to be some definite value presented to the end user, otherwise you’re not going to get any traction. And I think that that value has to be presented beyond a simple price savings. Whether it’s presenting a bundle of services to the consumer that makes their lives easier in some respect: a single bill, one throat to choke in case something goes wrong, those sorts of things. It can’t simply just be take your voice service from company B over company A because it’s much cheaper. There has to be something that helps the consumer make that decision." The cableco is counting on some help from the CRTC to smooth its move into the market. The company’s VP regulatory is worried that ILECs may throw up blockades to the new entrants. "We don’t want to see the incumbent phone companies targeting our entry or anyone else’s entry with targeted rate reductions," Ken Engelhart said during the Rogers conference call. "So we’re looking for some assurances from the regulator that any rate reductions that take place would be taking place across an entire band and wouldn’t be targeted, either through bundling or any other targeted means." Both Rogers and Engelhart cited various victories the competitors have won at the commission lately, including changes to the winback promotion scheme (NL, Feb. 3/04) and remarks by CRTC chair Charles Dalfen that seem to play into the cableco’s hands with respect to VoIP. Engelhart said he is awaiting a CRTC ruling on points of interconnection and reminded listeners during the conference call that the cableco has asked for clarification on pricing rules. Without those guarantees, his boss remarked, the rollout may have to be scaled back. "Are we taking a leap of faith here that we will continue to see positive data points from the regulatory front?" Rogers asked. "Yes we are. But we and our board are in full alignment that if the environment is not supportive we won’t deploy this across our entire footprint." Now that Rogers has thrown down the gauntlet, Bell Canada must be prepared to fight back to hold onto its market share. Quigley points to the announcement of bundled services by the telecom giant last fall as evidence that Bell is not taking emerging competition lightly. "We’ve also had a lot of talk from Michael Sabia about what’s going on in the wonderful world of IP and suspicion is certainly that Bell Canada is going to come out with some sort of consumer facing IP voice offering that will, in Bell’s case I’m guessing, just augment existing primary line service but nonetheless provide the possibility of introducing increasing layers of value for delivery to the consumer," he tells NL. "The big challenge from Bell’s perspective, however, is from the regulatory side. They are still fairly encumbered by the regulator in that they can’t be as aggressive nor as creative with their bundles because it becomes difficult for them to bundle local service in with anything else whereas, in today’s regulatory regime in any case, Rogers is not going to be faced with that." The cableco’s entry into the local telephony market comes on the heels of a similar announcement by Shaw Communications Inc. (NL, Feb. 3/04). The actions by Canada’s largest cable providers may delay yet again the rollout of service by American VoIP giant Vonage. The firm originally planned to offer service last fall. That has been postponed once and may be pushed back even further. "The big thing about Vonage is that they certainly wouldn’t position themselves as being a primary line replacement. It’s quite clearly going to be a secondary line sort of service," Quigley remarks. "But when you look at the Shaw announcement, the Rogers announcement, the talk that Sabia has been pushing out in the marketplace, that certainly has to make Vonage think twice." The Yankee Group analyst suggests that Vonage might align itself with smaller cable players to enter the Canadian market. Those cablecos could use the VoIP service to give themselves a short-to-medium-term advantage, he added.