I egregiously mentioned the fact that there is nothing in the ruling to prevent the MSOs from engaging in anti-competitive practices: I think you mean predatory pricing, not anticompetitive practices. Predatory pricing is defined as pricing below cost in order to drive others out of the market. When it's engaged in by firms without market share, though, it's not anticompetitive -- merely a boon (low pricing) to consumers.

If ever the firm pricing below cost is able to buy so much market share that it itself has market power, then the behaviour becomes anticompetitive. But I don't see the ILECs being reduced to <35% of the voice market anytime soon. If that happes, that's where the CRTC would step in.

That approach, by the way, isn't particular to the CRTC: it's standard competition policy, and it characterises how the Competition Act and its counterpart legislation in other countries defines predatory pricing.

Rather, my message was that should any player engage in such conduct, the CRTC always has the option to step in. That creates a much higher regulatory burden, and chills entry into the market -- who'd want to sink their costs when they know that they can be priced out of the market by the dominant player in the short term, and have to hope for a subsequent accounting decision to go their way at some unspecified term in the future?

Similarly to above, ex post regulation is generally thought to work well when no player dominates the market. When it does, ex ante regulation is thought to be the more efficient approach; that characterises how the CRTC has approached markets, how the Competition Bureau advocates markets be approach, and so forth.

Two commissioners (Andrée Wylie and Andrée Noël) were more avant garde in recognizing the fact that VoIP is different than regular telephone service: I thought this basically showed their misunderstanding of the technology. After all, if they created a radically different regime for phone service which happens to be encapsulated differently in the home-to-CO segment, then why on Earth wouldn't ILECs simply start wrapping that portion of the signal in IP, and thereby opt out of regulation?

Hello, there - with all due respect, this is truly written like someone that belongs to a cable company:-). Or, failing that, some new VoIP market entrant. First of all, let's clear up a few things here:

I think you mean predatory pricing, not anticompetitive practices. Predatory pricing is defined as pricing below cost in order to drive others out of the market. When it's engaged in by firms without market share, though, it's not anticompetitive -- merely a boon (low pricing) to consumers.

You are quite right - in a sense, I borrowed the words from the CRTC itself - please just check that quote in bold and italics in the story. That's the CRTC, not yours truly. And yes, they do not quite say "anti-competitive", but rather "stifling competition". That's pretty close if you ask me. And in fact, you are right again that my quote said "predatory pricing", which is in fact right. So if I was semantically incorrect in my blog post, I certainly wasn't on my quote on the NP. More importantly, can you deny what I am saying? Competition is what makes the world turn. Check my previous post. If you take out one of the "strong" players (ILECs), then, you just have the other one left (MSOs). What's then left to prevent the MSOs from getting the other smaller players out of the market? Nothing. But then again, the MSOs might just price their VoIP offering conveniently "just below" the market equilibrium price (not necessarily cost) to gain some market share, knowing that the ILECs cannot counter, and the smaller guys can also be squeezed.

If ever the firm pricing below cost is able to buy so much market share that it itself has market power, then the behaviour becomes anticompetitive. But I don't see the ILECs being reduced to <35% of the voice market anytime soon. If that happes, that's where the CRTC would step in.

Agreed. But VoIP is such a new market that nothing could be discarded.

Last but not least... this is the very first time in my life that I see a regulatory body pre-emptively fire a salvo against a competitor based on PRESUMPTION of behavior. Sorry, that just does not sit right with me. Again, you fail to convince me that the FCC model could not be applicable in Canada. That would have been, IMHO, the best course of action - the most friendly towards competition. I will be more than happy to pick up this thread via e-mail (you can fire one away by clicking on the link just below my photo).

So if I was semantically incorrect in my blog post, I certainly wasn't on my quote on the NP. More importantly, can you deny what I am saying? Competition is what makes the world turn.

Agreed: but my quibble isn't with the semantics, it's with the substantives. Predatory pricing harms competition only where the firm exercising it holds market power -- because, until it does, you've got multiple competitors with market share competing vigorously.

That view may, as you point out, work well for people who want to enter the voice market, like cablecos or new VoIP entrants. But it's hardly an unusual view: the Competition Bureau conducts its work according to that analysis, and so do most of their counterparts.

More to the point, what good arguments militate against it? If you take out one of the "strong" players (ILECs), then, you just have the other one left (MSOs). Where we part ways is in this idea of "strong" players: I see that as too subjective as to be workable. I think your point would be strengthened if you substituted the idea of vertical integration -- cablecos hold market power in the area of access lines, and access lines are an essential and hard-to-reproduce input for offering certain services, for instance -- but, even there, my opinion is that it's putting the cart before the horse.

If the cablecos (or bankrolled VoIP entrants, or whoever) want to buy market share, let them. If they end up buying so much market share that they hit significant market power, regulate them. In the meantime, the winner's the customer: that's how we approach predatory pricing generally, and I don't see why we'd want an exception here. But then again, the MSOs might just price their VoIP offering conveniently "just below" the market equilibrium price (not necessarily cost) to gain some market share, knowing that the ILECs cannot counter, and the smaller guys can also be squeezed. Orthodox competition policy calls this a win for the consumer: cheap services.

Now, I usually quibble with competition policy on this -- these are innovative markets, the product isn't standardised widgets, so pricing small firms out of the market isn't efficient because you're losing offerings and innovators. But here I don't think we're anywhere near that point, especially because the cablecos appear to be playing in a distinctly different area than the small, non-facilities-based players. (The cablecos are going head-to-head with the classic Ma Bell lines. Vonage is doing something a bit different, and -- as it happens -- a lot more interesting imho.)

Last but not least... this is the very first time in my life that I see a regulatory body pre-emptively fire a salvo against a competitor based on PRESUMPTION of behavior. Are you sure? This is basically how tariffs work, and they've been around for an awfully long time. Again, you fail to convince me that the FCC model could not be applicable in Canada. Hmm: I wasn't really addressing the FCC, and don't know as as much about how they do things as I'd like to. The impression I get from folks in the States is that there's a giant mess in this area and that the communication/information definitional thing is more political than analytic. But I'd be glad to be learn otherwise.

I guess one of the bottom lines here is just what it means to talk about offering a "VoIP service". My working conclusion is that it just isn't a meaningful description of a market -- it's just a reference to a broad set of protocols that can be used to move voice traffic in any one of a number of network segments (access, backbone, and the parts between). A jack-ended service that does inbound and outbound PSTN with its own NANPA number can run VoIP over ATM, SS7 over DSL, the latest flavour of whatever Eastlink uses, whatever: it's the same service, and noticeably distinguishable from, say, MSN Messenger. Heck, I still don't know whether what Videotron's doing is VoIP or not. Nor am I sure it really matters much.

That's not to say that market definition is necessarily straightforward. Only that the market definition step has to be the first one, and that calling something "VoIP" doesn't exhaust it. Had the CRTC simply followed the Andrées and said "ooh! Internet! shiny! don't touch!", there's absolutely no reason the ILECs couldn't have simply started encapsulating their voice signals in the access segment over IP, and poof! basic voice is deregulated in Canada, and the ILECs still have 95% market share or whatever it is.

(Now, I guess there're some who'd call that a good thing: the ILECs are certainly putting the case forward very aggressively. But that's another discussion than the one about VoIP.)