On Friday, I wrote a rapid initial assessment of the CRTC’s VoIP reconsideration. The headline in the National Post read “CRTC defies Ottawa on VoIP – Rejects federal advice.” The story began:

The CRTC snubbed the advice of the federal government yesterday and surprised the telecom industry by standing by its controversial ruling on Internet telephony, or VoIP, potentially setting up a confrontation between the broadcast regulator and the government, analysts say.

I’ll be clear and say that I don’t see grounds for a confrontation.

​Now that the weekend has passed, it is worthwhile reflecting a little further on the Decision. For the sake of simplifying the analysis, we’ll assume that Cabinet will accept the CRTC’s reconsideration.

We think that pragmatism will outweigh concerns that Paul Vieira raises in the National Post that the CRTC ignored the will of the government.

When the CRTC issued Telecom Decision CRTC 2006-53 on Friday, its reconsideration of how to regulate VoIP, it was responding to a directive:

to take into account the increase in demand for VoIP services and changes to the overall regulatory environment since the original decision was announced last year.

Was the CRTC really defying Cabinet, as the headline in the Post implied?

Let’s look beyond the Industry Canada press release issued at the time of the original Cabinet directive and look at parts of the preamble of the actual Cabinet direction. This can be found as an Appendix in the Public Notice that led to last Friday’s VoIP Reconsideration Decision.

• Whereas the Governor in Council notes that VoIP technology has transformed the nature and extent of competition in telecommunications markets;
• Whereas the Telecommunications Policy Review Panel has submitted its report to the Minister of Industry recommending reliance on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives affirmed in section 7 of the Act;
• Whereas, on April 6, 2006, the Commission rendered Telecom Decision CRTC 2006-15, entitled Forbearance from the regulation of retail local exchange services which applies to VoIP services;
• Whereas the Governor in Council is currently examining Canada’s Telecommunications policy and regulatory framework taking into consideration the recommendations of the Telecommunications Policy Review Panel and is following closely the public discussion concerning Telecom Decision CRTC 2006-15;

As can be seen from these items, it was Cabinet that tied together the Local Forbearance Decision with the VoIP Reconsideration. In telecom regulatory terms, let’s call it an example of bundling.

We can argue endlessly about how one party might have ruled different or whether the CRTC reached the right outcome. We’ll comment further on those points in the coming days.

But to me, it doesn’t look like the CRTC defied nor snubbed the Cabinet directive. Indeed, the CRTC’s decision to review the local framework appears to have been following the deeper intent of Cabinet to examine the complete bundle of VoIP and local services forbearance.

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CRTC, Cabinet, Paul Vieira, Local Competition, forbearance, VoIP, Mark Goldberg

Some thoughts on the VoIP market.

I was talking to a cable TV installer working at my kid’s place yesterday. He tells me that his firm is having trouble keeping up with the demand for their digital phone service.

A headline last week in Networking Pipeline read New Study: Kiss Traditional Telephones Good-Bye. So I thought it might be worth taking a look. I thought I would want to read about how the take-up of VoIP services must be exploding.

A new study from PointTopic found that VoIP subscribers jumped by 83% in 2005, and hit nearly 19 million subscribers worldwide. It’s just one more piece of evidence that traditional telephone [sic] are going the way of the horse and buggy.

Well then, it must be true. We’re just around the corner from tossing out our Contempra phones and that refurbished antique oak phone (circa 1918). At the time, it seemed to be such a great gift for my birthday.

So I went to the PointTopic study and found that I had trouble correlating what Networking Pipeline was saying to the original study.

Networking Pipeline said that the US, Japan and France lead the world in VoIP subscribers and then says that Asia lags behind.

Did Japan move to another region over the summer? I nearly missed the news that Pluto got demoted, so maybe a typhoon hit while my the power was out at my cottage. Actually, the report shows that Asia has almost as many lines as the Americas and Europe combined.

The report says

Asia Pacific has seen the slowest rate of growth in VoIP subscribers. This is mainly due to Japan, the main market, showing a slowdown in VoIP growth. Softbank, the driving force behind Japanese VoIP take-up, has had relatively low subscriber growth during 2005. Even with its high rate of VoIP usage, this has meant a slowdown in overall VoIP numbers.

That is very different from saying that Asia is lagging. In fact, it might be a preliminary indication that in Japan, the current service offerings are past the point of inflection in the demand curve.

The report notes that the term ‘VoIP’ is generally not mentioned by cable companies in North America. The name of the game is Digital Voice. It seems to me that one of the success factors for continued cable telephony adoption is letting people remain in somewhat familiar territory, coupled with the allure of advanced ‘digital quality.’ Do we really care what cable companies call it?

There is also a problem with nomenclature. What do we call the millions of VoIP – PBX systems that are connected to the PSTN with conventional TDM lines? Are they not included in the PointTopic census?

According to the ITU, at the end of 2005, there were 1.264 Billion conventional telephone lines, coupled with 2.137 mobile cellular subscribers.

Watching VoIP skyrocket from 0.31% of the world market to 0.56% is hardly enough data upon which to suggest that the end is in sight. I’m a believer in the potential for VoIP, but let’s not get caught in yet another round of unrealistic forecasting.

As Om Malik notes, India only has 1.7M broadband subscribers, less than 4% of their nearly 50M telephone subscribers. That makes it an unlikely candidate for VoIP replacement in the near term. It will be interesting to see where VoIP makes sense and where alternate technologies, such as wireless, prevail in such places.

Traditional phones going the way of the horse and buggy? Maybe.