Canada Wants Deregulated Internet Phone Service

By Wojtek Dabrowski

TORONTO, Nov 15 (Reuters) - The Canadian government has told the country's telecoms regulator to keep hands off some types of Internet phone services because it wants to open up further competition in the sector, a move that drew praise from Canada's two biggest phone companies.

Industry Minister Maxime Bernier said on Wednesday that the minority Conservative government has called on the Canadian Radio-television and Telecommunications Commission to start deregulating Internet telephone services that are considered access independent, or available over any broadband connection.

"We firmly believe that eliminating unnecessary economic regulation will stimulate competition in this new and fast-growing market. It will mean lower costs, fewer regulatory proceedings, and more competitive markets," Bernier said in a speech in Toronto.

"Barriers to entry in this market are very low. There is no reason to regulate it."

Telus Corp. (T.TO), Canada's No. 2 telephone company, does not have a Internet telephone product in the consumer market yet and had delayed launch due to concerns over regulatory disadvantages.

"Today's announcement will really encourage companies like ours to bring competing (Internet telephone) services to consumers," said Janet Yale, Telus's executive vice-president of corporate affairs.

Telus rose C$1.17, or 2 percent, to C$57.17 on the Toronto Stock Exchange as investors bet the company would soon wade into consumer Internet telephony, also known as Voice over Internet Protocol or VoIP.

Market heavyweight Bell Canada , which already offers access independent VoIP service, also lauded Bernier's statements.

"I thought it was a very encouraging speech, both in the specifics of VoIP but also in the general direction that (Bernier) set out," Bell Canada executive vice-president Lawson Hunter told Reuters. "This is one more step in the necessary reform."

Bell Canada stock finished 2 Canadian cents higher at C$27.01.

The government is aiming to deregulate access independent VoIP services, which are available on any broadband connection, as opposed to other types of VoIP provided over a managed network.

Deregulating all Internet telephone service would be "like deregulating the local telephone market," Bernier told reporters following his speech.

In September, the CRTC upheld a previous ruling that allows it to set prices for voice over Internet services. Bell Canada and Telus argued this was unfair because it restricts their ability to compete with cable firms and smaller rivals in the sector.

In 2005, the regulator decided Internet phone service should be subject to the same regulatory framework as traditional phone services because of similarities between the services.

This meant that generally, large incumbent companies would be subject to regulation, while new-entrant competitors would not.

"In a competitive sector, there is no reason to regulate some companies, while others can offer the services they want at the prices they want," Bernier said in his speech.

"It is time to have a level playing field from which consumers and small businesses will benefit."

Copyright 2006 Reuters.

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Wojtek Dabrowski
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