Deep Thoughts About VoIP's Future in Canada
With the Canadian government intent on de-regulating the country's $10-billion local telephone market and giving the incumbent carriers the freedom to set their own prices, it will be interesting to see the impact this decision will have on Canada's VoIP marketplace. To be perfectly frank, VoIP hasn't been overly successful in Canada. By this, I mean Real VoIP with all the bells and whistles that a Web-based service can offer. What Videotron and Rogers are offering right now is VoIP-lite because it's just plain old telephone service (POTS) with none of the online frills such as voice-mail to e-mail that rivals such as Vonage, Primus and BabyTel are offering.
Perhaps the reason the cablecos haven't rolled out the value-added features that makes VoIP such a compelling proposition is they haven't been compelled to do it yet. With the carriers being regulated in the local market and an unwillingness to become more aggressive with VoIP until the rules became more clear, the cablecos have been able to get away being an alternative option to attract consumers. In Quebec, Videotron has used ultra-low prices if you have a multi-service bundle, while Rogers and Shaw have been content to pick off customers pissed off with Bell and Telus respectively.
But what happens if Bell and Telus suddenly get more aggressive with their phone prices (both traditional and VoIP) to win back customers who may have strayed to the cablecos, Vonage, etc.? And what happens if Bell really starts to push Bell Digital Voice as a premium, multi-feature VoIP service, while cutting prices on traditional local service? This could become a strategic conundrum for the cablecos because they would have to determine whether to compete on price against traditional service, which looks and smells the same as cable telephone service provided by Rogers and Videotron. Or do the cablecos go upstream and go head to head with Bell Digital Voice by adding all the Web-based features of Real VoIP.
If I had to guess, the cablecos will go the premium route because it fits into their focus/obsession with disciplined pricing and ARPU. If this materializes, it would be terrific for VoIP and customers who want Real VoIP because the cablecos and carriers will have to compete on features and services - much like they do in the high-speed Internet access market where both sides are intent to increase speed and add more features as opposed to - heaven forbid! - drop prices.
Technorati Tags: VoIP
December 12th, 2006 at 1:36 pm
Real VoIP right now is used mainly as a second-line for long-distance savings and fax service in North America. The cablecos are offering local access over their cable infrastructure. Security, reliability and quailty will remain the key issues in first-line adoption for some time. Look how long it took for cell phones to be used as the prime line in households which initially provided mobility with reduced quality. Consumers do not yet have that common need to switch to VoIP. It will be a common opportunity through features that will start the migration.
December 12th, 2006 at 4:05 pm
You keep dreaming about this supposed price war. Just like there's a price war in cellular phones, a price war so incredibly vicious that getting voicemail costs extra, getting caller id costs extra, until you're paying $90/month for a phone you barely use?
Newsflash: these companies operate as a cartel. They will not compete against each other. They will take action to prevent new entrants from joining the fray, by cross-subsidizing their services to run newcomers out of business. Competition does not magically appear when there are at most 3-4 companies competing for your business. If there were a dozen competitors, probably one of them would break free of the cartel. But most people in Canada have one (1) phone company and one (1) cable company.
Please understand that “deregulation” does not mean “the government will cease making phone companies charge such high prices, allowing prices to fall”. What it mainly means is that “the government will stop forcing the incumbent phone companies to share their taxpayer-funded infrastructure with any other companies, driving those companies out of business since they would have to create a whole parallel telephone infrastructure and that isn't going to happen”.
What's going to happen is that compating VOIP services won't be allow to tie-in to the local phone network. So you'll be able to get all the VOIP you want, but you won't be able to call anyone with a traditional landline because Bell Canada charges $893,000,000 for competing VOIP companies to connect to “their” taxpayer-funded network. Bell Canada will have the only VOIP service that can interconnect with the traditional phone network.
Basically, all you need to know is this: Bell has been pushing for this deregulation. That tells you all you need to know about whether it will be good for competition (=bad for Bell's profits) or whether it will be bad for competition, and good for Bell's profits.
December 13th, 2006 at 10:53 am
I thought about this post last night and posted my own thoughts at http://benlucier.wordpress.com. It think it will be interesting to see how the ILECs react after having the ability to set pricing on VoIP and local lines. In a world where the incumbents fight for every dollar for features such as call waiting, voicemail, etc., It must be a difficult pill for them to swallow if they were given a choice of lowering their price by serveral dollars, or lose a customer. If I were a Bell customer, I'd cancel on purpose just to get better pricing. What if 28 million residential customers did that?
The ILECs are faced with a disruptive technology (VoIP) that has the potential to impact their sustaining technology (analog phone lines). By the time the ILEC comes around, others may already have taken a large bite out of their business that will be difficult to recover from. The Innovator's Dilemma, a book by Clayton M. Christensen has some interesting things to say about the impacts of disruptive to technology to established organizations, even those that are well run.