The CRTC (Canadian Radio-television Telecommunications Commission) begins today three days of hearings on VoIP regulation.  A total of 33 industry participants are scheduled to make presentations as part of the public consultation hearings.  The list is a who's who in the Canadian telecom and VoIP arenas, including the likes of the incumbents (e.g. Bell Canada, Telus), CLECs (e.g. MTS/Allstream), new VoIP entrants (e.g. Primus, Vonage, Yak), MSOs (e.g. Rogers, Cogeco), telecom vendors (e.g. Nortel, Alcatel), municipalities (e.g. Calgary, Vancouver), E-911 organizations (Ontario 9-1-1 Advisory Board) and well-known VoIP evangelist Jeff Pulver (from Pulver.com). [Ed. note: Actually, Jeff has several entries in his blog on the subject, including this one, which links to a National Post story from Kevin Restivo.] 

These discussions are attracting a lot of attention south of the border as well.  Besides the Pulver.com team, the American media is following the story with interest, as it provides the FCC with some interesting insights into policy making.  Ellen Muraskin interviewed me yesterday for a piece she wrote for eWeek, and I anticipate that there will be more Canadian analysts providing their views to various US editors, reporters and key media people. 

Earlier this year, the CRTC issued a preliminary opinion which signaled that it was considering adopting a regulatory model for VoIP.  More specifically, the CRTC initial stance was that VoIP should be regulated as a "telecom service" for the incumbents (Bell Canada and Telus), whereas it should be treated as an "information service" by the rest of the competitors. The rationale behind this position was that there were a few folks concerned with a "no regulation" scenario in which Bell and Telus would adopt a strategy to drive other small players out of the market, by setting their prices for services artificially low or by providing Internet access and VoIP service bundles.

Bell and Telus obviously were not thrilled, as they would not only risk losing market share, but also would face an uneven playing field versus the competition (a cable player such as Rogers, for instance, would initially have an advantage over the incumbents).  From a strict fairness perspective, they have a valid point: rules should be ideally applied evenly across the board. 

So what is the alternative?  Reiterating what I wrote in a previous post here at TF, my opinion is that the CRTC cause would be better served by "light regulation" that is premised upon public service goals such as emergency service (E-911), law enforcement (CALEA) and universal service funding. The rationale of this focus on light regulation is to allow this nascent industry an opportunity to flourish. VoIP is still in its blossoming stages and innovation in this area should not be choked before the industry has a chance to grow.

So what should the CRTC do?  It is a tradeoff between allowing the industry to fully reach its potential (i.e. very "light regulation" evenly applied across the board) or regulating the incumbents while allowing the competitors some freedom (in order to prevent the incumbents from completely killing the competition).  It is not an easy choice, since each option has its merits. 

The ultimate goal of any regulator is to create a market as perfectly competitive as possible.  From a competitive perspective it is necessary to have at least a couple of strong players in the marketplace, without giving a clear advantage to either one of them.  The ILEC / MSO duopoly, while not the best "perfectly competitive" scenario, at least works because the two players fight for the same customer, offering a bundle versus bundle deal for triple play services (voice, data and video).  This is already happening in the U.S.  If the CRTC adopts its initial stance, MSOs would get an initial advantage in Canada (granted they are a bit behind their U.S. counterparts, but still, the CRTC would have to watch them very closely).

I would also make the case that Canada would benefit more from regulation only after the need for that regulation is proven to be necessary.  In other words, my suggestion is to keep regulation to a minimum and provide an even level playing field for all competitors.  Why not take a page out of the FCC book, since their initial VoIP stance seems to be working well?  The benefits of "light regulation" (i.e. just concerning public service goals such as E-911 and CALEA) far outweigh the risks of anti-competitive behavior from the incumbents.  And, even should the incumbents engage in such practices, the CRTC can always have the option of stepping in to avoid a large-scale industry consolidation.