CRTC looks at VoIP regulation

The Canadian Radio-television and Telecommunications Commission (CRTC) this week released a public notice (PN CRTC 2004-2) that suggests the Commission might regulate local VoIP phone service the same way it regulates plain old telephone service.

That means incumbent local exchange carriers (ILECs) like Bell Canada International Inc. and Telus Corp., both of which aim for as little regulation as possible, would in fact face just as much regulation with VoIP as they do with their traditional voice offerings. ILECs would have to file tariffs -- price points and terms -- with the Commission before turning on local VoIP service for public consumption.

"This is the beginning of what's going to be some very vigorous discussion about the environment as a whole," noted Mark Quigley, a telecom analyst at The Yankee Group Canada in Ottawa.

The public notice also lays out ground rules for non-ILEC VoIP service providers like Vonage Holdings Corp. and Primus Telecommunications Canada Inc., saying those firms have to turn on emergency "911" service so users can get access police and medical help through their VoIP phones. Primus already offers this on its TalkBroadband service.

Non-ILECs are also obliged to pay contribution charges, a percentage of their revenues, just like traditional competitive local exchange carriers (CLECs) do. Contribution charges are meant to offset the cost of providing local phone service in high-cost areas.

Quigley said the ILECs probably wouldn't be happy with the CRTC's preliminary view of VoIP regulation. Bell has argued that the Commission panders to new entrants in the phone market, and puts a particularly heavy regulatory burden on ILECs to give newcomers a leg up.

The public notice seems to indicate the CRTC's preference: continue to regulate the ILECs and let the non-ILECs off the hook.

"It essentially says competitors will be treated the same as the way they're treated today," Quigley said. "They won't have to file tariffs....They're riding on the Internet infrastructure, which Bell is footing the bill for."

A Bell spokesperson said the carrier is mulling over the CRTC's public notice. "We'll review the notice and comment in due course."

Janet Yale, Ottawa-based vice-president of government and regulatory affairs at Telus, said her company would most certainly be chatting with the Commission about what the public notice says. She said the CRTC's definition of VoIP and how it should be regulated might be off the mark.

"We really have to think of this in terms of the different kinds of services that can be offered using voice-over-IP technology, perhaps new applications that people don't necessarily think about," Yale said. She wouldn't provide an example of such "new applications," but she did say Telus would tell all as the debate moves forward.

Quigley said it's early days yet. The debate is really set to begin next month. The CRTC is holding public consultations on this matter in Gatineau, Que., on May 19 and 20. The Commission invites written comments by April 28. Parties looking to take a more active role in the proceedings should notify the CRTC of their intent by April 16.

"This will end up turning into a discussion about competition," Quigley said. "But one thing it doesn't take into account is the effect of other services outside of IP voice or traditional voice," such as wireless voice, IP video, instant messaging -- other services that could eat into local voice revenue.

"My hope, in any case, is when this does get pushed down into the larger discussion around market competitiveness, that it includes...those services that lie just outside, but have an impact on what's going on with local service in Canada."

Yale from Telus said usually the CRTC gives people 60 days to file written submissions for public consultations. But in this case "the Commission has asked us to file by April 28. That's less than 21 days, including Easter. That's a bit of a concern for us ... We're going to be considering whether or not we need to address that specific procedural issue."

Brownlee Thomas, a Montreal-based telecom analyst at Forrester Research Inc., said one ILEC may well cheer the CRTC's view of VoIP regulation.

"This is a great opportunity for MTS-Allstream," she said, referring to Manitoba Telecom Services Inc., the Winnipeg-based ILEC that in March said it would purchase Allstream Corp., a Toronto CLEC.

Thomas pointed out that Allstream has a lot of experience with IP, the technology on which VoIP is based. As a CLEC, it could offer local VoIP service without facing stiff tariff duties, whereas its ILEC competitors, Bell and Telus, would have to abide by the Commission's decisions regarding price points. If MTS does buy Allstream, the Manitoba ILEC gets CLEC status outside of its home province, and a regulatory edge over the competition.

The CRTC's public notice says the Commission wanted to investigate VoIP regulations after Bell requested a review of the rules governing VoIP service and service providers, like cable companies like Cogeco Inc. and Shaw Communications Inc., both of which have indicated that they intend to ramp up VoIP services of their own.

Thomas said the public notice might inform cable companies as they turn on VoIP.

"It may encourage the cable cos to move forward more aggressively on their plans, in order to take advantage of the incumbent telcos being potentially held at bay."

The public notice also says the CRTC is undertaking the investigation after Call-Net Enterprises Inc. (Sprint Canada) wrote to the Commission asking about the regulatory requirements of VoIP service and service providers. The public notice says the CRTC aims for a technology-neutral approach to regulating services. Since VoIP employs the same numbering scheme as traditional phone service, and it does essentially the same thing, VoIP should be regulated just as traditional phone service is.

"VoIP services should be subject to the existing regulatory framework, including the Commission's forbearance determinations," reads the public notice.

In February, Bell applied to CRTC asking the Commission to forbear from regulation certain data products: digital network access services at DS-3 speeds and higher, special routing services at DS-3 speeds and higher, high-speed metro services and future services that fall under the same umbrella.

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