TELUS urges CRTC to treat VoIP as different service from traditional local telephony  On Sept. 21, the first day of the CRTC’s hearings on Voice over Internet Protocol (VoIP) services, Network Letter sat down with TELUS Corp. executive VP, legal, government and regulatory Janet Yale to sound her out about her company’s position. TELUS argues that VoIP services are fundamentally different from traditional primary exchange service, and has asked the commission to refrain from regulating what it calls “access independent” VoIP offerings – service that is decoupled from local service. In its comments, TELUS points to vigorous competition in the VoIP arena as reason to exercise a light regulatory touch, and draws an analogy between VoIP and wireless services. Following is a transcript edited for clarity arising from that conversation.Network Letter (NL): The commission has focused today on public safety issues and 911 services. Is that what you expected?Janet Yale (JY): I think it’s absolutely expected that they’re going to ask questions of the new entrants in terms of what the service is really about. Are they really offering an alternative to primary exchange service, or is it something that’s not exact? In other words, it’s functionally different. Its service characteristics are different, and people’s expectations, therefore, about what is available should be different. I was very encouraged by the presenters from Vonage who talked at length about the fact that this is different in terms of geography, in terms of technology, in terms of service features, in terms of functionality. And, customers in the marketplace should really drive the evolution of the product. In other words, for the time being it may be very different than primary exchange service. But, over time it may become more and more equivalent. In the meantime, people have to understand those differences. And, I thought it was great that they make it clear to customers that they shouldn’t have expectations that it’s the same as telephone service when it’s just not technically possible to do that.NL: No matter what the commission ends up deciding on the overall issues, we’ll likely see some strong requirements for disclosure about the 911 issues. JY: I think they may well do that. My own view is that if it’s not intended, necessarily, as a substitute for primary exchange service, why should you impose those requirements? At the end of the day, one of the things that’s neat about the marketplace is there may be different grades of service depending on how much you’re willing to pay. So, if you want it to function, from a quality perspctive, from a 911 perspective, from a variety of perspectives, as a true substitute, and you disconnect your primary line, then fine, you’ll pay something for that. But, what if somebody wants it as a cheap second line for their teenagers, and they don’t need 911 because they have their primary line and they don’t need service quality assurances because they don’t care if their kids don’t have quite as good a quality as they have on their primary line? If you propose the obligations on every provider in the marketplace, you don’t allow the differences to materialize. You preclude that. I think the point that Vonage was trying to make was that customers in the marketplace should decide what they want. Don’t assume that everybody wants the same thing.NL: The gradations and differences between the types of services that you’re talking about are clear to phone companies. Are they clear to consumers?JY: The issue should be whether or not customers know and understand what they’re buying and signing up for. I totally agree with the notion that people should be aware of what they’re buying, and if it doesn’t have things that people take for granted as part a of primary exchange service, they should know and they should sign a waiver. It was interesting that Vonage says you can’t sign up unless you do the following things, either way is that buyers know and understand what they’re taking and paying for.NL: From your speaking notes, when we’re talking about how different a service this is, do you have projections for how many people will be choosing out-of-city numbers, out-of-local numbers? That’s one of the key differentiating factors that you’re raising with the commission.JY: You should talk to the providers who are already in the marketplace. We are not going to make a decision about whether or not to enter the marketplace until the rules of the game are clear, because it’s the ILECs for whom the rules of the game are very unclear right now, given the commission’s preliminary views. So you really have to address that question to the people who are already offering service.NL: But you’re trying to convince the commission to choose a particular regulatory route versus another, and you’ve brought up this argument that people will choose out-of-city numbers as an example of how different VoIP is from traditional phone service. So, is it going to be important?JY: Well, as Vonage pointed out today, one of the things that’s really neat is you can get multiple phone numbers. You can get a local phone number, and you can get phone numbers in other cities. To use an example that’s in our comments, if my son chooses to go to university in Vancouver, he may want a local number that’s Ottawa-based so that his Ottawa friends can reach him, but he may also want a Vancouver number so that he’ll be local to the people that he meets in Vancouver. And, he may want a Montreal number so that his grandfather who still lives in Montreal can feel like he’s calling him from right next door. You can have, actually, multiple phone numbers for a single line.NL: But, we’re guessing for the purposes of trying to convince the CRTC one way or the other that that will actually be significant.JY: No, I disagree with that. The issue is to explain to the CRTC the differences from primary exchange services. This is a different service because of the differences and the characteristics. You, as a customer, don’t have to take these features. The point is that what makes it different is because it’s an IP-based application, the features and functionality are quite different. You as a customer, if it appeals to you, will sign up. If those attributes and features don’t appeal to you, either you won’t sign up, or if you do sign up, you don’t have to use them. It’s not a requirement, it’s an opportunity.NL: One of the other interesting statements in your comments is that this is a vigorously competitive environment for VoIP. A lot of folks would say there is no marketplace for VoIP right now. The numbers of people using the service is tiny.JY: Well, the issue isn’t how many customers they have yet, the issue how easy is it to enter the market and when you do enter the market, how easy is it to get up and running? So, Primus, Vonage, and a number of others are actually here today. They obviously believe they’re in the marketplace because they’re here to speak to what it is that they’re doing. They’ve all made it clear that they believe this is a vigorously competitive marketplace and one of the things that is very different is that once they decide to turn up service in a particular country, it’s instant. The moment you turn up service in Canada, you can access any customer who has a high-speed Internet connection. It’s not like the old days of the CLECs who exchange by exchange have to turn up service and interconnect and make huge investments on literally the lowest city level, exchange by exchange. It’s expensive, it’s time consuming. There are waits in terms of being able to connect individual customers. With VoIP, you get the box with the software. You’re turned up. And, so, they’re instantly covering the entire Canadian base of high-speed Internet customers in Canada. That’s phenomenal. And, there is no delay in terms of the time from which you say I want service till you get it. Fundamentally different. And that’s what makes it vigorously competitive. The fact that they don’t have a lot of customers doesn’t mean they couldn’t instantly. It’s not like they’re only serving the east end of Montreal and half of Toronto. Each of these competitors are serving all of Canada from the day they turn up service. There are already eight providers in Canada offering service. In terms of the spread and the rollout, it’s going to be quite a different evolution.NL: They can offer the service across Canada, but convincing consumers to switch to a competitive service still seems to face the ILEC incumbency advantage in terms of the existing billing relationship and the ease with which they can keep a customer.JY: But that’s like saying DTH competition had a battle. I mean, when satellite competition came to cable, it was the same sort of thing because the satellite goes up in the air and they instantly cover all of Canada. So, once they’re turned up, then it’s a question of convincing consumers to switch, of the advantages of switching. Obviously there’s inertia. People have to make a decision to switch. So, where they currently have a provider, they have to get used to the idea that there are advantages to switching. Once they see the features and functionality associated with the alternatives, then they’ll make a decision about whether or not it’s worth switching. But, that’s a free and open competitve marketplace and there are no barriers to switching.NL: One of the things that was discussed in your comments, as well, was the analogy to a competitve wireless environment, which is forborne. In the past couple of days we’ve seen significant consolidation of the Canadian wireless marketplace.JY: The wireless market is vigorously competitive. The commission has forborne from rate regulation in the wireless market from the launch of wireless – and at that time there were only two. So, we actually have more competition in the marketplace than we did at launch when the commission said it was going to be sufficiently competitive that they didn’t need to regulate it. And, I think by all accounts, that policy has been a tremendous success, and the wireless market is vigorously competitive and growing exponentially.NL: Some observers would say the acquisition of Microcell is about getting a pesky competitor out of the way to begin to get rates back to a level where the carriers want them.JY: Microcell – standalone players in any market are always ripe for acquisition, because, at the end of the day, niche players don’t have the same sort of opportunity to offer a suite of products and services in the space in which they operate. We see that in broadcasting, and the pay and specialty sector, in the telecommunications sector, in the Internet sector with the mom and pop ISPs and with wireless. If you can’t withstand the competitive marketplace and you become a target of acquisition, that’s the competitve marketplace at work. That’s not an anti-competitive issue as far as I’m concerned. These people may not all be able to survive in the long run. And, at the end of the day, the issue is competition, not protecting individual competitors.NL: Your speaking notes indicate that you’ll offer standalone DSL service by early 2005? JY: Yes, let me explain that to you. One of the things that Vonage and Primus are saying is that they want to be able to get customers who give up their primary service from Telus and all they then need from Telus is DSL, and then they get their telephone service from then. Up until now, those services have been offered together. You’ve got DSL as an add-on to primary exchange service. You didn’t take DSL separately from primary exchange service. It wasn’t even technically feasible to do that until the entry of these Voice over IP providers. And, so, they’ve asked that DSL be available on a standalone basis, and we’re saying, “absolutely.”NL: Is this the first time we’re hearing this?JY: Yes, because it’s something that’s become relevant as a consequence of the entry of these providers. And, I’ll tell you, it’s not a regulatory imperative that’s driving that commitment. It’s a business one. Because, if we don’t make it available then customers will go to cable and get cable modem service and ride their Vonage over that. We’d rather offer them something than nothing. And, at the end of the day, we’re just going to drive customers away if we don’t allow them to take something from us, even if it’s not everything we’d like to sell them.