The Canadian Cable Television Association (CCTA) warns that the CRTC’s status quo approach to Voice over Internet Protocol (VoIP) telephony services won’t open the floodgates to competition in the local telephone business. The CRTC states in Telecom Public Notice 2004-2 its preliminary view that VoIP services should be subject to the existing regulatory framework governing switched telephone networks, in keeping with the principle of a technologically neutral regime, and would include forbearance. "I think the fact that the commission has over and over again made very clear that they are going to regulate the ILEC business based on a service definition, as opposed to a technology definition, sends a strong signal that there is no deregulation through the back door going on," CCTA acting president Michael Hennessy tells Network Letter. "There’s certainly a construct to work with, but let’s face it, that construct has not led to significant competition in the local market yet. Seven years after the local competition decision, we’re sitting on average at 97%-98% for the (incumbent) telephone companies. So that would suggest that there is something structurally wrong in terms with perhaps the cost of interconnection or perhaps the efficiency in the tariffs." With the commission sending out a strong message that it is going to continue to regulate the local telephony business, Hennessy says, "Hopefully, we can put that (debate over deregulation) aside and focus on are the rules that they’re suggesting sufficient to allow entry to actually occur, to be viable and to be sustainable?" He adds that VoIP is an untested technology that will likely not lead to a shakeup in the telecommunications industry. "I think one of the things that people have to understand about VoIP is that it is still untested. Everybody says look at Vonage Holdings Corp., they are in the market, they’re all over the United States, but I think maybe they have 150,000 customers out of I don’t know how many hundreds of millions of households - that’s nothing." Instead of sticking with the status quo, Hennessy states that the CRTC should give VoIP providers less stringent rules to enter the telecom market to ensure that competition is fostered. "I guess the bottom line is that the CRTC has not proposed any new changes for CLECs or resellers. So really what they’re saying is that the rules that really haven’t totally promoted competition in the marketplace to date are significant for competition in the future. I don’t know if that’s true…The bottom line has to be a regime that promotes sustainable competition." Ken Engelhart, VP of regulatory at Rogers Communications Inc., says that the cable industry isn’t seeking a lot of concessions that would give it a leg up as a new entrant in the telephony business. "What we’ve said is we want a complete ban on the phone companies being able to bundle monopoly and competitive services, and we want their ability to reduce prices to be restricted so that they can only reduce prices across a broad area. That latter point is more of a clarification than it is a new rule because that’s more or less what the rules say now. We just want that clarified." He explains: "If we enter in Mississauga, we don’t want to suddenly wake up the next morning to find that there’s a special low price for Bell customers in Mississauga because that wouldn’t be fair because…they are targeting just where we entered. So we want a rule against that type of targeted price decrease and we want a rule against bundling, and I think that is very modest when compared with the advantages that satellite (TV distributors) had when they started competing with cable (in TV distribution)." While the CRTC so far has not announced special measures for new entrants, it also has not moved toward deregulation of the telephone market, as called for by Bell Canada (NL, March 3/04). "It’s the absence of a negative. If the CRTC had let Bell be deregulated for their Voice over IP service, I think that would have given Bell a weapon to crush competition before it got started. (The CRTC notice) was for me just a signal that the world is just the way it used to be," Engelhart says. "It’s not really a change. I always thought the request by the incumbent phone companies for a radical rewriting of the rules because of VoIP just made no sense at all, so I’m glad to see that the world still makes sense." Ted Chislett, president of Primus Telecommunications Canada Inc., is more upbeat about the potential for competition in the telephone marketplace, given the CRTC’s approach. He tells Network Letter, "I think it’s very reasonable, and there’s nothing unexpected. It’s very pro-competition." He congratulates the CRTC for placing few requirements on CLECs, an approach he says will provide the regulatory flexibility - on issues such as mandated 911 service, for example - that Primus needs to compete. Deregulation will likely follow, he says, but not until the incumbents’ stranglehold on the market is broken. Primus has been among the most aggressive in pursuing a VoIP strategy, and recently announced that it would expand its TalkBroadband VoIP service with local numbers in Victoria, Winnipeg, Quebec City, London, Kitchener-Waterloo, Halifax, Mississauga and St. Catharines. Further, the company says 911 emergency service is now available on all 15 of the areas it serves. The 911 service will only be accessible when customers call from the location at which they’ve registered their phone. Primus also announced April 5 that pricing has been reduced to $15.95 per month, with its Power Bundle reduced to $25.95 per month, and the Ultimate Bundle to $30.95 for customers who purchase the TalkBroadband Voice Gateway for $139.95. A new unlimited bundle has also been added for $45.95, including unlimited calling within Canada and to the U.S., and all local features except alternate number and unlisted number. Pricing for customers who don’t purchase their voice gateway will continue to pay the same rates, with basic service starting at $19.95. For commercial customers who purchase the voice gateway, pricing for the basic service has been reduced to $25.95 per month, the Power Bundle has been dropped to $32.95, and the Elite Bundle has been lowered to $38.95. Primus Canada also introduced new long distance pricing for its VoIP offering. Subscribers can now select a long distance plan offering calling to 20 overseas countries starting at $0.025 per minute through a package providing 400 international minutes for $10 per month. Primus’ existing Canada/U.S. calling package that was 250 minutes for $10 per month will now offer 400 minutes at the same price.Theresa Muir, VP of regulatory affairs at Allstream Corp., also cheers the approach taken by the commission. Allstream provides the underlying technology for Primus’ VoIP offering, and Muir says the commission’s tact will help foster competition and greater use of competitive facilities. "Certainly the commission said what we have said since Bell initially filed their application: that it’s the service attributes that the commission regulates, not the technology. So, the commission’s point of view is very much along the lines of what we presented to them. We continue to think that the incumbent is, obviously, dominant in the voice market. This is another voice service. The way the PN is phrased, and their point of view, is certainly one we’d share," says Muir. "I’d have to take issue with ‘CLEC-favourable.’ I mean, all the commission is saying here is the incumbent is dominant, which they are. There’s no argument there, even from the incumbent, that they hold in residential close to 100% of the market. All the commission does is simply regulate that fact that the incumbent is the dominant provider of basic voice service. I think any competition, or anything that lends itself to greater competition, is a good thing. Obviously, if you let the dominant provider squash competition, that’s a bad thing." Microcell Telecommunications Inc. has a message for the CRTC regarding the VoIP proceeding: make sure there are workable and practical solutions addressing technology neutrality provisions. The Montreal-based wireless operator has experience in this regard having fought with the commission, ILECs and public safety answering point (PSAP) operators over enhanced 911 services the company was required to implement before it could become a wireless CLEC. Dennis Béland, Microcell’s director of regulatory affairs, tells Network Letter that it’s one thing for the commission to say it regulates services not technologies, but the practical implementation of a service on different network technologies can’t always have the same look and feel as it does on a wireline network. "It’s fairly brief and conceptual right now," he says referring to the public notice. "A statement of technology neutrality coupled with a requirement that Voice over IP providers must support 911 conceptually makes sense, but the devil is in the details. What we ran into trying to become a wireless CLEC for a period of years was exactly that, translating that fine statement of principle into reality." Béland fears that, as in the case of 911, the incumbents will decide to say technology neutrality means identical to what they offer. The commission can’t allow that to happen, he says. "In the early days of Microcell’s attempt to define what 911 service we would provide as a wireless CLEC, we were confronted with those sorts of divisions both on the part of the 911 call centres and on the part of the ILECs. We had to fight for years to say, ‘No, the technology is different.’ They should be treated in a neutral fashion but we need to find what practical means there are of providing quality 911 service with this technology," he tells NL. In the end there was consensus what wireless 911 would look like, resulting in Microcell becoming the country’s only wireless CLEC, but Béland says that doesn’t mean there won’t be a déjà vu with VoIP companies. "I think VoIP providers are going to confront a very similar thing. People are going to take the commission’s statement of technology neutrality as meaning identical and there’s a risk that they just end up getting the run around for a couple of years." But the issue of implementing solutions despite the commission’s technology neutrality principle won’t likely be limited to 911. Béland explains that it is equally likely the interconnection regime could come under fire from VoIP, but adds if cooler heads prevail solutions will be easy to come by. "Once you get into the details of how a VoIP provider works, you’re going to have interesting issues in terms of how do you make equal access work in that context? How do you make traffic interconnection, local network interconnection, work in a VoIP context? If people can go in with a constructive attitude defining solutions rather than a focus on their own interpretations of technology neutrality, hopefully they’ll be able to escape what we had to go through as a wireless CLEC." Against the background of this regulatory debate, New Jersey-based Vonage has also made its entry into Canada. The company announced April 12 that it will work with GT Group Telecom Services Corp. to provide service in this country as its CLEC partner. The next day, it announced that its first market would be Toronto where it will offer 416 and 647 area codes. There is no indication that it will provide 911 service. Neither Bell Canada nor TELUS Corp. are making any comment. In light of recent ILEC calls for a lighter regulatory touch (see article on wireless substitution in this issue), the two companies are likely disappointed with the commission’s starting point. Comments on the CRTC’s preliminary framework for regulating VoIP are due April 28. The CRTC also announced that it will hold a public hearing on the matter May 19-20.