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mikebrown Posted:
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Haniltery Posted:
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diana87 Posted:
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What is the main
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Trafford Posted:
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diazou Posted:
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beast321 Posted:
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Av8rix Posted:
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Telecom: Lots of Innovation, Little Growth: Even Wireless, Data Markets Feel Pin

Vonage In Print NewsNovember 28, 2003

By Mark Evans

The Canadian Radio-television and Telecommunications Commission issued its 2002 annual report on the telecom industry yesterday and to no one's surprise, there are few surprises.

Industry growth is negligible, the incumbent carriers still have more than 95% of the local telephone market while the Internet and wireless sectors are rolling along with double-digit growth. As Homer Simpson likes to say, "D'oh!"

In typical bureaucratic fashion, the CRTC has divided the $32.2-billion industry into several neat segments: long-distance, local telephone, Internet services, mobile and paging, data and private line, fibre backbone and metropolitan area networks and payphones. It is a straightforward way to add up the numbers and compare each segments year-over-year performance.

As a result, the CRTC dutifully reported local wireline revenue dropped 1.7% and had a 2.4% decline in lines. In some urban markets, competitive carriers had 23% of local business lines and 13% of residential lines. The CRTC also reported that long-distance revenue decreased 2.8% to $6.5-billion in 2002 while the number of minutes increased 3.5%.

While the annual report is interesting, it is also becoming increasingly irrelevant.

The biggest reason is that the distinction between voice and data networks is diminishing as more voice, data and video traffic flows over high-speed Internet networks. At the same time, it is becoming more difficult to distinguish between different carriers because the Internet allows international companies to provide service around the globe.

As Nortel Networks Corp. chief executive Frank Dunn said earlier this week, how do you regulate a U.K. company that offers local phone service to customers in Canada or Hong Kong? Along the same lines, how do you track this kind of activity? Can you track it?

"People look at these [CRTC] numbers to shape their thinking and inputs into important policy issues like competition or the state of it," said Lawrence Surtees, director of telecom and Internet research with IDC Canada.

"If the boundaries melt, then the definitions need to change."

Mr. Surtees said the Federal Communications Commission in the U.S. is already beginning to think about how the telecom world is evolving. Next week, it is holding a forum on Voice-over-Internet-Protocol (VoIP) technology.

The discussions are aimed at gathering information about "advancements, innovations, and regulatory issues related to Voip services." FCC chairman Michael Powell said the forum could lead to formal proceedings and a new set of regulations by next year.

The idea of virtual service providers taking business away from incumbent and competitive carriers in specific markets is just starting to hit home. In the near future, Canadian carriers will be going head-to-head with global rivals. It will come down to who has the best prices and/or service rather than where a service provider is located.

Just look at Edison, N.J.-based Vonage Holdings Corp., which plans to offer Internet telephony services in Canada soon. How does the CRTC plan to track Canadian customers who leave Bell Canada or Telus Corp. for Vonage? Even if the CRTC does account for Vonage's Canadian business, will it be accounted for as local telephone or Internet revenue?

Over the next few years, the CRTC's annual telecom compendium will become less important because it will not offer an encompassing report on what is really happening in the market. Whether you want to call it a fork in the road or a new paradigm, the telecom industry is entering a new phase.

Perhaps one of the most troubling issues is that there is little or no industry growth. In 2002, the Canadian market increased by 1%, or $300-million. Bell Canada and Telus Corp. have managed to improve their bottom lines by reducing operating expenses and debt levels. But what happens after the telcos have pared all of their fat? Where is the top line growth? As far as I can tell, there are few high-growth markets. And even in healthy markets such as wireless and data services, the battle for customers is lowering prices and limiting revenue growth.

Maybe the CRTC should drop the whole annual report idea. It is not an odd suggestion when you consider all the applications and proceedings in the regulatory pipeline.

With its limited resources, maybe the CRTC can find better things to do with its money than track industry activity year after year.

This story also appeared in:
  • National Post, 11/28/03
  • FP Investing, 11/28/03

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