And the final verdict of the CRTC VoIP decision announced earlier today was pretty much what most expected: nothing more than a rehash of their original position made public earlier last year.  The chances that the public hearings held last September would have changed the final outcome would be really slim. 

The key question is: will it really promote the growth of a nascent industry?  Again, the key mission of a regulator is to attempt to set the course for a market to be as competitive as it can be.  And by taking out the incumbent telcos (including Bell Canada and Telus) with a pre-emptive salvo, it is my belief that competition was not best served.  By constraining the ILECs to a certain VoIP offering price level, there is nothing preventing the MSOs (the other major VoIP players in terms of human and capital resources) from setting a price just below that level. 

From a pure microeconomics perspective, no matter what duopolistic model one chooses (Stackelberg, where competitors move sequentially, the Bertrand oligopoly, where competitors simultaneously choose prices or Cournot's duopoly game, where they choose quantities simultaneously), the "equilibrium" price level will always be smaller than for the case that one of the players (in this case the ILECs) cannot match the MSOs with a competitive move.  Let's take broadband access as an example in the US.  Some would model this as a Stackelberg game, in which the ILECs were the first to move (with DSL), with MSOs making a move in response offering cable access at a lower price.  It took the RBOCs a while to match the price, and eventually there were other pricing moves downwards.  But the fact is, there was competition - albeit not a perfectly competitive market. 

However, if one of the players is constrained on pricing moves (at least on their incumbent region), the resulting price would be undoubtedly higher than the Nash equilibrium of the duopoly.  This is just plain old simple Economics 101.  So the best prospects for lower VoIP pricing would be if the ILECs decide to attack each other's territory as a CLEC, albeit it might be costly for them (in terms of defending their own turf).

Mark Evans made a good point about which players got the early control of the VoIP market in the US.  After Vonage, Cox, Cablevision and Time Warner, the rest of the pack (about 396 players) each has roughly $70k in annual sales.  So what that really means is that the bulk of the market belongs to the MSOs and an xSP (Vonage).  Let's take this to Canada, in one region (say out west).  Shaw now has a $55 VoIP plan and is no rush to lower that down, because it does not have to.  Maybe it will a bit when Vonage will compete more, but that's about all.  Telus will not really be able to match any price drop in the future with their consumer offering, due to ruling.  And Bell West probably will not engage in a lot of competition in the Telus footprint (knowing that this move would be matched by a similar Telus move in Ontario and Quebec).  Is this the competition that the CRTC hopes to achieve?

Regulation is necessary as a tool to guarantee that players do not engage in anti-competitive practices and to ensure that some public service goals such as emergency service (E-911) and law enforcement (CALEA) are met.  The FCC showed that this model worked - and it would have been wise for the CRTC to have taken a similar approach. VoIP is still in its blossoming stages and innovation in this area should not be choked before the industry has a chance to grow.  Therefore, in my humble opinion, the CRTC should have created an even level playing field for all the industry participants.  And, in the event that the ILECs would engage in anti-competitive practices, the CRTC could always have the option of penalizing them in order to avoid a large-scale industry consolidation.