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VoIP Cost Savings Entice Carriers

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Voip Cost Savings Entice Carriers

December 1, 2004

By Stefan Dubowski

Voice over IP (VoIP) may well bring cost savings to businesses, but what do carriers get out of it? Apparently the technology does just the same for service providers, judging by the words of presenters at a Toronto telecom conference.

At the Canadian Institute’s Voip Summit, held on Nov. 30 and Dec. 1, speakers from Vonage Holdings Corp., Bell Canada Enterprises Inc. (BCE), Telus Corp. and Allstream outlined their companies’ interest in VoIP.

According to Vonage Canada president Bill Rainey, IP phone technology lets his company get into the carrier game at a much lower price than the traditional carriers faced when they started out. Rainey said it cost Vonage $22 million to build its North America Voip access service. Lawson Hunter, BCE’s executive vice-president, his company has $3 billion sunk into its traditional, non-VoIP network and pays $1 billion a year for upkeep.

Rainey said his company operates a Voip service that is detached from traditional access technology. Vonage’s service rides on the Internet, whereas BCE and its subsidiary Bell Canada had to roll out wires to bring regular phone service to its customers.

“The key here is maximum flexibility, where the customer is serviced the way they want to be serviced,” Rainey said of the access-free Voip product. Asked later if Vonage would move into the enterprise space, he said it’s not likely. Vonage focuses on the residential and the small office, home office crowd.

“We’d rather go for the other 80 per cent” of customers than the 20 per cent or so that are enterprises in Canada, he said.

Ted Woodhead, director, regulatory matters at Telus, said IP spells network convergence — a single access infrastructure for both voice and data services. It used to be that telcos like Telus would operate two, distinct networks, one for voice and one for data, but that paradigm is on its way out. The converged architecture spells lower operating costs and the potential for new services. Application developers can create programs for a single network that applies to voice and data needs, for instance.

Woodhead said “companies like Call-Net” Enterprises Inc. would struggle in the near future as smaller Voip players attack one side of the traditional telecom reseller’s business and incumbents like Telus hammer the other. Call-Net representatives did not present their point of view at the conference.

Ron McKenzie of Allstream said IP is a technology nexus, a way of corralling numerous new high-tech protocols for corporations. Consider the combination of IP and XML for a voice-driven Web service, for instance. “Voice over XML is a natural way to distribute the application,” to get Web services out to every sort of end point, including wireless and desktop IP handsets, he said.

McKenzie added that Allstream would make money selling application development and other services to enterprises interested in Voip offerings.

The carrier reps also took the conference as an opportunity to drive home their opinions of telecom regulations.

McKenzie urged the Canadian Radio-television and Telecommunications Commission (CRTC), the government body that oversees telco regulation, to regulate Voip as it does plain old telephone service (POTS). Such a regulatory regime would keep incumbent local exchange carriers like Bell and Telus from dropping their Voip prices so much that smaller players like Allstream can’t compete.

“Do not take your foot off the pedal now,” McKenzie said, noting that the current regulatory landscape has started to yield some positive results by way of market competition.
Micro Bibic, Bell’s chief of regulatory affairs, reiterated his company’s view that it’s time for a telecom policy review. Bibic said the CRTC keeps too heavy a regulatory hand on the market.

Hunter from BCE said the Commission should mind what regulators in other places do. In jurisdictions like Australia, the regulator takes a less intrusive approach than the CRTC does, he said. “I hope Canada doesn’t end up the only one out of step with the rest of the world.”

Larry Shaw, director general, telecom policy at Industry Canada, said telecom regulation is a tricky subject.

Communication is important in Canada, as it supports social, economic and cultural aspects of society. Voip is particularly difficult to deal with, he said, because it essentially splits in two an erstwhile single entity — communication used to be a matter of service and infrastructure coming from the same place. Now a Voip service provider need not own wires to provide a voice offering.

“We have to start re-evaluating competition when access and service are split,” Shaw said.

Ian Russell is chair of the Coalition for Competitive Communications, a group of business telecom customers concerned about competition and its effect on service prices for enterprises. He said sometimes corporate clients “get caught in the crossfire” as companies like Allstream and Bell argue over telecom policy, but as far as his group is concerned, the CRTC should regulate Voip lightly.

“It will bring a huge range of choices to users, a wider range of features and functions,” Russell said. “Our concern is the CRTC will get in the way and disrupt innovation.”

The Commission is undertaking a Voip policy study these days. According to a CRTC spokesperson, by early 2005 the regulator will have a final decision about the technology, whether it should be regulated like POTS or dealt with differently.

Jon Arnold, Toronto-based Voip program leader at Frost & Sullivan, an IT consultancy, said in time the industry will pay less attention to the financial aspects of Voip and more to the applications it supports. “Competition will eventually be more feature- and services- driven.”

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