The Changing Face of Telecommunications

Recent developments in the regulation (or lack thereof) of telephone services in Canada promise a very affordable future, even for northerners. Ironically, however, this could mark the beginning of the end for quality telecommunications services in Canada’s rural regions.

Early last month, the CRTC ruled that they would regulate internet-based telephone services, commonly called “VoIP”, that are provided by so-called “incumbent” providers. This would include established telephone companies like Northwestel and Telus.

Companies not already in the market, such as Rogers Cable and smaller start-ups, on the other hand, will have the run of it.

The CRTC’s intent is to foster competition in this fledgling marketplace by giving new businesses a chance to develop. They expressed concern that the incumbents would unfairly price their services below cost, effectively leaving no opportunity for profit by new companies.

Regardless of the CRTC’s efforts, VoIP promises to change the telecommunications landscape forever, much in the same way the internet itself altered how information is shared.

Because the internet is a decentralized global entity, VoIP means that telecommunications will no longer be governed by locale. Northerners will not have to use Northwestel for their phone line. Heck, we won’t even need a Northwestel phone number.

I’ll use the services of a VoIP provider, Vonage, as an example. Vonage is a US-based company operating a subsidiary in Canada. They provide phone services to anyone anywhere in Canada, at far lower prices than we’re used to, especially in the North.

There is one requirement for this service: a high speed internet connection.

When you sign up you get to choose the phone number you want from any region of Canada. So, for example, if you have a lot of friends in Toronto and you want to let them call you locally, pick a number in the 416 area code.

Once you’re signed up, Vonage sends you a small box you plug into your Internet connection. That’s your new phone line. You plug any regular phone into it.

What’s more interesting, though, is that the box Vonage gives you doesn’t depend on your own internet connection, any one will do. Say you travel a lot; take the little box with you and plug it into the internet wherever you are in the world. People can still reach you by dialling your phone number directly and you can dial out as normal.

But Vonage’s service is really only the first step in the new era of telecommunications. Their service still depends on nationally-based telephone number ranges. You can expect to be able to get a phone number from anywhere in the world soon. And then, once VoIP reaches critical mass, telephone numbers will be a thing of the past.

The intent of VoIP service providers is to leverage the broad reach of the internet to wrest control of telecommunications services from the incumbent providers. In essence, their aim is to evolve voice and video communication into just another internet service.

As the co-founder and CEO of Skype, (and grandfather of KaZaA), Niklas Zennström said: “… just like you don’t pay for sending email, or browsing, you don’t expect to pay for voice calls … Charging for telephone calls is something from the last century.”

So when the CRTC recently limited what Canada’s incumbents can do with VoIP while opening the market to new competitors, they threw open the floodgates of telecommunications evolution.

On the one hand, this is great for Northerners. We can subscribe to Vonage and call anywhere endlessly for 35 bucks a month. You gotta like that.

But the pain will be felt in the long run. Northwestel didn’t build the telephone and internet network north of sixty with local revenues. Hefty subsidies from government and regulated southern telecommunications firms were key to ensuring we can all have a phone line that doesn’t cost more than our mortgage payments.

Northwestel continues to depend on these regulated subsidies — millions of dollars each year — to ensure quality of service to the nether regions of this country.

In short, our southern compatriots pay a hidden tax in their phone bills to regulate the cost of service in the North.

So what’s going to happen when significant amounts of money are siphoned away from regulated Canadian firms to foreign VoIP entities like Vonage? It’s unlikely that a Wall Street desk jockey will sign over a cheque to Northwestel to make sure phone service remains affordable in Gjoa Haven.

For this is what VoIP represents, a rapid decentralization and globalization of telecommunication services. Despite the best intents of regulators like the CRTC, this will occur explosively and almost uncontrollably. The international market will dictate the telephone network of the future.

Urban centres with large populations will be well served by this as phone services truly will become free. Rural regions will suffer, both in terms of quality of service and cost.

Canada’s incumbents have got to evolve to the next stage of telecommunications quickly. They’ve got to leap ahead of the VoIP wave and prepare for whatever form the market takes on the other side, both to ensure their own survival and ongoing quality service to remote areas of the country.

Otherwise, remember the party line? Prepare to queue up for it down on the corner when you have to choose groceries over the luxury of a private internet connection.

Copyright 2005 Andrew Robulack.

First published in the Yukon News, Friday, June 3, 2005