It was really interesting to see how many people jumped on the CRTC bandwagon, praising its VoIP decision as being a savvy one, and one that really promotes competition by taking ILECs such as Bell Canada and Telus out of the game (at least on their own home turf – and let’s be honest about it: many folks seriously doubt that we will see those players actively promoting and campaigning VoIP offerings outside their incumbent territories).

Amazing how none of these so-called “expert” analysts (with a few exceptions, of course) picked up on the fact that even under a full deregulation VoIP scenario, the ILECs would have faced margin pressures, and would have had to reduce prices to maintain their market standings and stay competitive. As Michael Sabia himself declared in a Globe and Mail interview a few weeks ago, the telcos would need to cannibalize their own base to keep their market shares. But the consumer would have been the winner in that case, since a new lower price equilibrium would have been reached. Competition and lower pricing is what drives progress, and Japan is a great example of that (check out this TF entry about Yahoo! BB).

However, by preemptively taking the ILECs out of the VoIP game, the CRTC pretty much assured that the existing status-quo on pricing would continue (there will be some competition, but price drops will be small compared to what they would have otherwise been. Let’s take a look at the MSO VoIP launches thus far: most cablecos have thus far been pretty “rational” and “disciplined” in their pricing (e.g. Shaw’s $55 / month offering). The lone exception is Videotron, but the fact of that matter is that the MSOs will balance profitability and volume. So it is very unlikely for us to see a major price battle happen any time soon.

There is some hope that to stem the loss in local market share, Bell and Telus might resort to offering some discounts in Internet, video (Bell Canada’s ExpressVu service) and wireless segments, or perhaps offer some bundling savings. However, thus far, Bell announced that it was taking away its $5 offer for 1,000 LD monthly minutes anywhere in North America for customers subscribing to the Bell bundle (local, wireless, Internet and satellite service).

In the meantime, the incumbents are appealing the decision to the federal cabinet, a process that can take at the very least 6 to 9 months, particularly considering the current turbulence in Ottawa.  The fact that there were two dissenting opinions should provide the ILECs with some valuable ammunition during the appeals process. 

On a separate note, Industry Canada recently formed a 3-member panel to review the Canadian telecommunications policy. This initiative is essentially a broad review and is not expected to affect current CRTC proceedings. Chances are that the panel will probably zero in on less sensitive matters like broadband access and deployment, rather than VoIP and/or competitive issues, and will provide its recommendations to Industry Canada before the end of the year. The findings may have implications on the role of the CRTC in telecom regulations in the future.