News release

May 12^th, 2005

CRTC decides on limited regulation for VoIP
telephone services to foster competition

OTTAWA-GATINEAU — The Canadian Radio-television and Telecommunications Commission (CRTC) today determined that it would regulate Voice over Internet Protocol (VoIP) service only when it is provided and used as local telephone service.

This decision will further the goal of building sustainable competition in local telephone markets. Under this decision, incumbent local exchange carriers – those with market power – cannot price their local VoIP services below cost to stifle competition.

The Commission's mandate includes creating regulatory conditions that allow competition to grow. As each telecommunications market becomes sustainably competitive, the CRTC then refrains – or forbears – from regulating that market.

Local telephone markets are among the few remaining telecommunications markets in Canada that are regulated by the CRTC. The CRTC opened these markets to competition in 1997. The continued regulation of the incumbent local exchange carriers reflects the fact that they continue to have market power and competition is not yet entrenched in those markets.

“We believe that VoIP represents a key moment in the evolution of local exchange telephone services,” said Charles Dalfen, Chairman of the CRTC. “This is precisely the moment when Canada needs a regulatory framework that will provide the quickest road to competition.”

Fostering competition in local telephone services

This decision is a critical element in furthering the Commission's mandate to create conditions for sustainable competition in local exchange telephone markets. In recent weeks, the CRTC also announced that it would:

• Accelerate its response to applications for retail tariffs on local service by incumbents, so they can respond more quickly to customer demand.
• Set criteria for forbearing from regulating the local exchange services market.
• Allow regulated telephone companies to offer promotions to customers in local markets, subject to certain safeguards.

“Why did we find that VoIP is a telephone service? Because Canadians use it as a telephone service, it's being sold as a telephone service and it functions as a telephone service,” said Charles Dalfen. “It provides two-way real-time voice communications to and from anyone with a telephone number on the public switched telephone network anywhere in the world. This decision is consistent with the focus in the Telecommunications Act on services rather than technologies.”

VoIP services under offer at this time are not materially different than primary exchange services – the kind of local telephone service now in general use. VoIP lacks the characteristics of a new service because:

• Many customers regard VoIP telephony as the equivalent or a close substitute for primary exchange services, making it unlikely that most consumers or businesses would have both VoIP and traditional phone service.
• Most companies selling VoIP services offer them with the same core attributes as local exchange services. VoIP may offer certain distinct features, but these do not define it as an entirely different kind of communications service.

No regulation of the Internet

The decision is consistent with previous Commission decisions not to regulate retail Internet services. The decision also means that the CRTC will not regulate computer-to-computer (peer-to-peer) VoIP services which reside solely on the Internet.

The beginning of a process

This decision also comes at the beginning of a broader process that aims ultimately to eliminate price regulation in local telephone service, including VoIP.

The CRTC issued a public notice on April 28, 2005 (Public Notice CRTC 2005-2) seeking comments on how to reduce the regulation of residential and business local exchange telephone services, as competition becomes sustainable in those markets.

“Our goal is not to regulate,” Mr. Dalfen said. “Our goal is to not have to regulate. And once there is sustainable competition in local markets, we will not do so.”

The Canadian Radio-television and Telecommunications Commission is an independent public authority that regulates and supervises broadcasting and telecommunications in Canada.

Reference documents: Telecom Decision CRTC 2005-28 [.htm][.pdf]
Telecom Decision CRTC 2005-25 [.htm][.pdf]
Telecom Decision CRTC 2005-21 [.htm][.pdf]
Telecom Public Notice CRTC 2005-2 [.htm][.pdf]
Telecom Circular CRTC 2005-6 [.htm][.pdf]

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Media Relations:
   MediaRelations@crtc.gc.ca, Tel: (819) 997-9403, Fax: (819) 997-4245

General Inquiries:
   Tel: (819) 997-0313, TDD: (819) 994-0423, Fax: (819) 994-0218
   Toll-free # 1-877-249-CRTC (2782), eMail: info@crtc.gc.ca
   TDD - Toll-free # 1-877-909-2782

Copies of today's documents are available through our Internet site (http://www.crtc.gc.ca) or by contacting the public examination room of any CRTC office. These documents are available in alternative format upon request.

Date Modified: 2005-05-12

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