Monopoly and Telephony
Mark Weller
During Expo '67 in Montreal, many new technologies were displayed, technologies that embodied the hopes of the future, technologies that were to be available to the consumer very soon. My particular favorite was the video-phone, which allowed one party to see the other when the two were connected during a call. One commentator's remark in particular stands out: "better make sure you comb your hair before you use one of these!"
Unfortunately, the implementation of technology rarely goes as planned. The videophones have been just one casualty. Not only are there the inevitable technical glitches, but, even more worrisome, are the government-erected barriers, regulations, and taxes that prevent the new technologies from fully developing. The telecommunications industry has been particularly hard hit by regulation, which often has a perverse way of preserving old technologies.
One current example of this is internet telephone technology. A few weeks ago, Bell Canada and the Stentor Group asked the Canadian Radio and Telecommunications Commission (CRTC) to limit the ability of internet service providers (ISPs) to offer telephone services. The companies view this as unfair competition, and want the CRTC to stop it by treating ISPs like phone services.
The technology in question is one you may have seen on television, or perhaps in reality. Internet phone initially involves the use of computers with microphones on them to sample and transmit voice messages. However, with the development of newer compression technologies, companies like iPhone have come up with a way to provide real time audio communication between computers over the internet. So, if you and your friend both have microphones and speakers on your PCs, and you have internet access that allows for this service, and you are both running the software, you can talk across the net.
Now, at first blush, this modest technology would not seem much of a threat to the regional phone utilities. When I first looked at this technology about two years ago, I have to admit I thought it was a flash in the pan. After all, as long as you had access to a telephone, why would you go through this process to make a call, other than for the novelty of it? However, since then, these technologies have become easier and easier to use. As well, you can interact with the regular phone system much more easily, send faxes, and take advantage of new phone sets that are designed to plug directly into your computer.
The real advantage, though, is economic. When it comes to long distance communication, the internet phone services cost no more than your existing internet service fees. So if you are on a flat rate per hour of $2, then your charge per minute is just over 3 cents. That is a 50 percent saving over even the cheapest long distance plan, and most users actually pay less than 3 cents a minute for net access.
Long distance telephone providers have been concerned about this for a while. However, since they have largely benefited from de-regulation, they have been slow to approach the CRTC for intervention. Not so the local phone monopolies which have, of course, suffered due to competition which has forced them to offer broader service at cheaper prices. The Stentor/Bell consortium has asked the CRTC to force internet service providers to comply with regulations and pay additional charges because they are concerned that consumers might use the net to reduce their phone costs. Specifically, the group wants all ISPs to register with their local phone company and pay fees that would subsidize local phone service—a sort of tax on ISPs for providing a service that consumers want.
The one hope for consumers may lie in the fact that it is difficult to distinguish between different types of data traffic being sent across the net. Regardless of its technical feasibility, however, it is clear that the CRTC should not implement these policies. Charging ISPs would simply create a disincentive for the development of iPhone and other technologies and is completely inconsistent with the CRTC's broader initiatives to allow for greater competition and less regulation.
Once again, here is an example of how regulation can cause even the beneficiaries of a new technology to act irrationally. In a monopoly, the enemy is competition. If Bell had to compete with ISPs for customers, I have no doubt it would soon become a key player in the market for internet telephony. However, instead, it is pursuing a wrong-headed policy of requiring ISPs to be treated like phone providers.
All this leads us to understand why there are still no videophones. It is easy to imagine that if the net ever got to the point where live television signals could be sent over the web, another consortium would soon appear. Just as the regional Bells are arguing to the CRTC that they should receive an internet fee, so too, one can envision the able companies asking that ISPs be charged if they provide television services across the net.
Once again, the CRTC is positioned to make a decision that could foster greater connectivity, and prepare Canada for the twenty-first century, or to defend a vested interest, and in so doing postpone the future. One hopes that the government will resist siding with one stakeholder over another, and instead let the market determine which technology serves consumers best.
Click here to return to the Articles Index.
Click here to get to TheWellers.com home page
end