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2005: Year of the Quadruple Play

Consumers looking for a four-part package of services that includes high-speed Internet, cellphone, local telephony and television services will have a larger number of choices in 2005.
Rogers Communications Inc. will enter the fray in July with the launch of Internet telephony service, while Telus Corp. will get into the game with the launch of a digital TV service.
The quadruple-play has become a must-have for carriers and cable companies because they “lock in” consumers by offering modest discounts. Consumers can reduce their monthly bills but they tend to spend more money with a single service provider, rather than spreading it around to several suppliers.
The quadruple-play market is becoming more crowded as carriers roll out digital TV over their high-speed networks while cable companies get into the local telephony business using Voice over Internet Protocol technology.
The significance of the bundle was illustrated this week when The Wall Street Journal made a big deal of a potential agreement that could see Time-Warner Inc., the second-largest cable firm in the Untied States, offer wireless service from Sprint PCS to its 11 million customers. Time-Warner, which already offers cable, local telephony and high-speed Internet access service, said it is working with Sprint on rolling out a wireless trial.
In Canada, Eastlink Communications Inc. became the first quadruple-play service provider after it signed a deal earlier this month with Rogers Wireless Inc. EastLink said customers, who already buy at least two of its other services, will be able to buy wireless service from Rogers at a 15% discount if they sign a three-year contract.
Bell Canada has offered all four services for several years, although it needs to file a tariff with the Canadian Radio-television and Telecommunications Commission prevents if it wants to include local service in a bundle.
The necessity or desire to offer triple-play or quadruple-play bundles has prompted different service suppliers to establish alliances. Primus Canada Telecommunications Inc. and Call-Net Enterprises Inc. are reselling wireless service from Microcell Telecommunications Inc., while Shaw Communications Inc., which will launch an Internet telephony service next year, has talked about entering into a deal with Rogers Wireless.
With several carriers and cable companies offering the same bundle of services, a key challenge will be product differentiation. How will these companies appeal to consumers when they are serving up the same flavours of ice cream?
Telecom consultant Mark Goldberg said the marketing tools to sell bundles will be no different than how stand-alone services such as high-speed Internet access and television are sold today.
“At the end of the day, the value in a commodity-type service is excellence in customer service,” he said. “It tends to be proven when there is a problem; not when everything is running smoothly. How responsive is a company when you want initial installation? Do they provide service to meet your schedule or give you a broad time range? When you want to ask questions about a bill, do they make you go through five different levels of a call prompter? Those are the kind of things customer will be looking for.”
Providing this service appears straightforward but it is far from simple. BCE's Bell Mobility unit, for example, has gone through terrible problems trying to implement a new billing system. For the past six months many of its customers have not received their bills or have been billed incorrectly. On a positive note, Bell's Emily voice-recognition system has pared down call-centre activity and reduced operating expenses.
Kona Shio, managing director with Conscius Capital Partners, said price could be a weapon. (Many bundles come with two- or three-year contracts, which discourages consumers from leaving to take advantage of better offers.)
“For telcos and cablecos, [bundles] make sense to reduce [turnover],” he said. “It is not pricing to attract subscribers but pricing to attract and retain subscribers.”
© National Post 2004

Vonages Wins!

Vonage scored a major victory today when a federal court ruled Minnesota cannot regulate/treat the company as a regular telephone service provider. The decision comes on the heels of the FCC's ruling that Internet telephony falls within its mandate – not the states. The federal court decision is just another chapter in the regulatory process now unfolding in terms of who will regulate Internet telephony – if, in fact, it can be regulated. In Canada, the CRTC is expected to make a decision in early-2005. For a lot more insight and comment on the Vonage/Minnesota ruling, check out Jeff Pulver's blog.

CRTC's 2005 Mandate

As Canada's telecommunications regulator heads into 2005, it faces a litany of challenges at a time when the $32-billion industry is poised to go through extraordinary change.
Among the most pressing issues the Canadian Radio-television and Telecommunications Commission must address are whether/how to regulate Internet telephony; finding a replacement for David Colville, who retired recently as vice-chair, telecom; dealing with a heavy backlog of regulatory decisions and applications; and the start of the next price-cap regime.
At the same time, the CRTC is being pressured to implement a comprehensive regulatory review. BCE Inc. has been leading the charge for more than a year, and assembled a small regulatory army to push CEO Michael Sabia's agenda.
Obviously, there is a lot of urgency abound but it would be a surprise to see the CRTC change its current ways. Under the helm of chairman Charles Dalfen, the CRTC has become a methodical, pragmatic and some would say slow-moving body. Rather than move quickly, the CRTC tends to take its time to make sure the right decisions are made.
This approach frustrates the carriers because the telecom industry is experiencing tremendous change. The Internet has made it possible for companies to offer a wide variety of telecom services to residential and business consumers. Using high-speed networks, competitive services can be offered from anywhere in the world.
This has dramatically changed the competitive landscape because you do not need your own network to do business. All you really need is a compelling service and savvy marketing. A good example is Vonage Holdings Corp., which has attracted more than 300,000 Internet telephony customers in in North America with relatively simple technology.
In many respects, some parts of the telecom service market have become a free-for-all. How does the CRTC or the U.S. Federal Communications Commission regulate a company offering service to North American consumers over the Internet from Thailand or Romania? It raises the notion of whether telecom regulators are becoming less relevant or effective. There is a legitimate role for regulators but their responsibilities and mandates are evolving.
For the CRTC, Internet telephony will be an important and defining regulatory landmark. The CRTC's preliminary view is incumbent carriers such as Bell Canada and Telus should be regulated while competitors such as Vonage and Rogers Cable Inc. should be free to set their own prices. Bell and Telus argue this approach will hobble them in a fast-growing market, and the industry and consumers will be better served by having a level competitive playing field.
If the CRTC follows its original thesis, this suggests it will try to regulate Internet-based services. This will be a major policy reversal given a 1999 decision concerning New Media suggested the CRTC would not try to regulate the Internet. How the CRTC intends to regulate Internet-based services will be fascinating to consumers and regulators around the world.
The CRTC's telecom bench strength will be tested with the departure of Mr. Colville, who played a key role in defining Canada's telecom policy over the past 14 years. Who replaces him is important because the telecom industry needs a vice-chair who has a strong grasp of the regulatory and technical realms. Mr. Colville's successor will no doubt play an instrumental role in defining how Canada adopts and operates in an Internet-based world
While the CRTC needs to look forward, it must also tackle a regulatory backlog. There are decisions to be made involving fundamental issues such as Competitor Digital Network Access that have been in the system for more than a year. This is inexcusable because incumbent and competitive carriers need regulatory certainty more than ever.
Without a doubt, 2005 is going to be a big year for the CRTC and Mr. Dalfen, whose five-year term as chairman expires at the end of 2006. For the CRTC to stay relevant, it needs to move decisively and dramatically this year. Anything less will hobble the industry, which has provided Canadians with world-class service at bargain-basement prices.

Net2Phone

Does anyone remember Net2Phone, which was offering Internet telephony – the PC to PC variety – long before VOIP became the flavor du jour? Well, the company is apparently alive and well with a new and improved strategy focused on providing VOIP services to cablecos.
Today, Net2Phone said its service has been expanded to more than 80% of the U.S. The Newark, N.J.-based company, which crumbled when the dot-com bubble burst, has also moved into Canada by providing local phone numbers in Toronto, Montreal, Calgary, Vancouver and Hamilton.
I've always found Net2Phone interesting because it was such a hot investment commodity after the Internet moved into the mainstream. At the time, the idea that you could make free phone calls over the Web was revolutionary.
Net2Phone's problem, however, was that it was ahead of its time because the company was relying on consumers using dial-up connections at a time when high-speed access was in its infancy. If the company had been three or four years later out of the game, it could have been Vonage.

Who's Zooming Who?

An Australian outfit called ARNnet has put together a list of the 50 most powerful people in networking. Not surprisingly, Cisco's John Chambers leads the pack. What's surprising is Nortel CEO Bill Owens comes in at #40 – ahead of Vonage's Jeff Citron and Google's Eric Schmidt.
Clearly, the folks at ARNnet must have indulged in too much holiday cheer to include Owens among the networking industry's elite. Sure, he heads up a US$10 billion company but he got the job because no one else wanted it. Since he took the helm in April, the only area where Owens has shown any real expertise is his ability to make promises that Nortel can't keep – can anyone say four self-induced postpoinements of Nortel's financial restatement?
You have to admire Owens' military record, his willingness to accept an ugly job, and the calming influence he has brought to Nortel. But it is also important to remember Owens has minimal telecom experience and will likely be replaced as CEO as soon as Nortel gets grounded.

What's What in VOIP

The New York Times' Thomas Fitzgerald weighs in on VOIP with a lengthy article on the basics of the service and who's it. For people who closely follow the industry, there is nothing eye-opening here but it does offer a broad overlook at who's out there. I'm a big fan of the NYT's technology coverage, and perhaps this story is an indication that VOIP is about to make a major move into the mainstream.