Sunday, May 15, 2005

Feeding Bell Canada to the Dogs?

Leonardo Faoro - The VoIP Weblog

According to an article at CNET, the Canadian government has decided to regulate only incumbent local phone companies’ VoIP services, i.e. Canada’s “Bells”, in order to permit easy market entry for new VoIP players. Naturally, the Canadian telco lobby is aggravated by the decision, claiming it makes it impossible for existing telcos to compete in the VoIP space.

Here’s why the skeptics are upset. Bell Canada and Telus, the two major incumbents north of the border, own most of the last mile infrastructure. As such, they provide the data link layer of Internet telephony applications even when they don’t control those applications. That is to say, if you’re a Vonage customer using DSL, that DSL is no-doubt provided by Bell or Telus. In effect, the Canadian ruling exempts Vonage from the regulations forced upon the data link carrier (Bell Canada and Telus) that enables Vonage’s service. Many have said this is unfair to the incumbent carriers.
I was reading some of the quotes from the execs of Telus and Bell Canada over at Russ’s blog, and these guys sound like spoiled sore losers, claiming the decision is “bad for consumers” and will “stifle investment in technology”. (I am weeping for the loss: the Big Bell’s innovations over the last ten years have been jaw-dropping, have they not?)
The Canadian government’s attitude is appropriate. The big incumbents in North America have been propped up for decades by government regulation, artificial tariff rates, and tax subsidies. This old-school approach is designed to provide universal access to network applications in underserved regions, such as blighted or rural areas. But it’s a formula that’s fundamentally at odds with innovation in the industry.

So what this ruling does is force the incumbents to re-think their business models. It asks them to consider being the maintainers and providers of the local network infrastructure (which is evolving slowly) rather than the actual voice service (which is evolving faster than the government can keep up). But, if incumbents do continue to provide voice service, even over IP, then it forces them to continue providing regulated public safety services, like 911, too. In effect, it asks them to change nothing. Is this feeding Bell Canada and Telus to the dogs, so to speak? I don’t think so.

Canada basically has a good solution here because it doesn’t force the VoIP startups to become infrastructure experts—that’s Bell’s job—and it doesn’t force Bell out of the VoIP market. If only the FCC could be so smart on May 19. Hopefully the debut of the new Star Wars movie won’t be the only good thing that happens that day, and the Feds will be as smart about this as Canada has been.


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