Mark Quigley, research director for the Yankee Group’s Canadian market strategies, tells Network Letter that true competition to the incumbent telcos in local telephony won’t come until the cable companies introduce their Voice over IP offerings. The cable operators have vowed to introduce services that are functionally similar to circuit-switched telephony, their foray into telephony will have a much larger impact on the competitive landscape, Quigley says. "They will deliver a solution that’s much close to a telco solution. It will be designed to displace primary lines," he says adding that there will be backup power, multiple handset capability and other services. Service bundling will be the key going forward as cable companies will be able to compete with telcos in combining services, which makes the cable company’s offering much more compelling. Neither the pure VoIP nor telephony players can offer the same. "Some of the research that we’ve done suggests that a) you need to have a discount if you’re going to encourage people to jump. The second thing is, obviously, the larger the discount is the more likely people are to go. But if you are a cable company and you are going to sell those services, doing it on a like-for-like basis just doesn’t make much sense. "When I say that, I mean that the cable companies local and long distance by themselves would be 15-25% or whatever it is less than the telcos. But if they are able to do that and say ‘if you get the cable, high-speed Internet, local and long distance you can save 15%’ you’re tying people down across a number of services. You’re reducing churn. You’re making it I think a much more compelling value proposition than Vonage who can just come to the table with voice."