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Loosen Bell's Iron Grip

Vonage In Print News
August 25, 2003
By Tyler Hamilton

It's been more than a month since the telephone regulator ordered Bell Canada and kin to sell their high-speed Internet services separately from their local phone services.

It was an important decision, the result of a complaint filed by Call-Net Enterprises Inc, the Toronto-based parent of Sprint Canada.

But five weeks later, nothing has really changed and consumers continue to be denied choice in the marketplace.

First, a little background. Call-Net doesn't sell high-speed service yet, but it's one of the few companies offering a competitive local telephone service to the residential market. It's an uphill climb for Call-Net at the best of times.

In its submission to the Canadian Radio-television and Telecommunications Commission early in the year, Call-Net argued that Bell had an unfair advantage by requiring its high-speed Sympatico DSL customers to also have Bell's local phone service.

How, asked Call-Net, could it lure customers to its own local service if these customers had to first give up their high-speed service from Bell (or Telus, or one of the other established telcos)? Put another way, how could Call-Net hope to keep its current local customers if these customers want to get high-speed service from Bell?

They're both valid questions, considering Canadians are the second-highest users of high-speed Internet services in the world on a per capita basis, behind only the South Koreans. Bell, by making high-speed service inseparable from local service, has been able to keep firm grip on customers and thwart Call-Net's competitive efforts.

The CRTC agreed last month with Call-Net and ruled that Bell, Telus, Aliant and others had to change their ways.

As a consumer who treasures choice in the marketplace, I can relate to this issue. I've been interested in testing out Sprint Canada's local service for several months now, but because I've been a long-time subscriber to Bell's high-speed service, I'm unwilling to give that up. Many friends I've spoken with have raised similar issues.

When the CRTC ruled that Bell can't deny DSL service to customers who go to Call-Net for local service, it was a win for all Canadian consumers.

A couple of weeks after the CRTC's ruling, I decided to exercise my options. I called Sprint Canada and asked for its local service, making clear I'm a High-Speed Sympatico user with no intention of giving it up.

The response from the customer service agent? "Bell has not set the wheel in motion for me to set up that line," she said.

I asked when I could get that line. "All the telcos said it would take a lot of work," she explained. "I really don't know what's going to happen."

It wasn't a surprising response. The CRTC said its decision took effect immediately, but Bell and Telus and the other established telcos said many "technical" issues had to be sorted out before they could comply.

Duncan McEwan, president and chief operating officer of Sprint Canada, assured me last week that discussions with Bell are ongoing and the local/DSL split should take effect shortly.

"Our goal is to have this operational with the next four weeks," he said, with the caveat that more foot-dragging could stall the process.

I'd be dragging my feet, too, if I was Ma Bell. The CRTC's decision could have huge ramifications for the former monopoly.

Think about it: What limits the decision to Call-Net? What if I simply don't want local service, or want to use my wireless phone as my regular phone? What if I wanted only DSL service, and chose to talk with family and friends through a voice-over-Internet-protocol (VoIP) service?

"Theoretically you could do that," said McEwan. "I suspect you could just get DSL on its own."

And that would suit Voip service providers such as Vonage and Net2Phone just fine. Both companies have eyes on the Canadian market, particularly the millions of people who already subscribe to DSL service.

If they could convince people to cancel their local phone service and just use their DSL connection for VoIP, the rules of the game suddenly change. Bell's iron-grip hold on traditional local telephone service would be suddenly weakened.

"The structure of the industry, and the structure of industry-regulation, has yet to grapple with the changes that engineers and physics have wrought," states a recent industry report from the Seaboard Group called "It's Not Your Parent's Phone."

Seaboard argues that the "IP world" and services such as Voip aren't just talk of the future - they're already upon us. "It will change much that used to be `certain'," states the report, which concludes that "consumer communication is on the cusp of radical change" as Canadians discover the many benefits of always-on high-speed connections to the Internet, including getting phone service through the Internet.

Dave Burstein, editor of DSL Prime, an online trade publication, says Bell and other large incumbent telcos will "fight like hell" against any ruling that turns their own DSL services into weapons for their competitors.

Bell already loses money on DSL service. Without a profitable local business underpinning DSL provision, the telcos couldn't sustain the service at current prices.

The big test will come when Bell begins complying with last month's ruling. Consumers who don't want to go to Call-Net but just want DSL may begin to push the matter with Bell. If Bell refuses to comply, this could lead to another complaint filed with the CRTC.

"If this happens and there's a complaint, we'll look at it," says Denis Carmel, a spokesperson for the watchdog.

At that time, the burden of proof would be on Bell to show it's not discriminating against competing service option, such as Voip or wireless landline replacement.

The Call-Net decision was just a precursor to more interesting rulings to come. As consumers, we should all be pushing the line if we are to see meaningful competition in the local phone market.

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