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Canadian regulators to go easy on VoIP upstarts?

The deadline is quickly approaching for Canada to decide how it'll regulate Net phone services, and some predict it'll favor upstarts.

The deadline is quickly approaching for Canadian utility officials to decide how they'll regulate Net phone services, and some industry insiders predict they'll favor upstarts like Vonage over the country's incumbent phone operators.

The Canadian Radio-television and Telecommunications Commission, or CRTC, is supposed to decide by Thursday how it will regulate calls made using voice over Internet Protocol, or VoIP.

The prediction among some is that the commission may tell incumbent phone operators such as Telus and Bell Canada that their VoIP calls will be regulated in the same way as other calls they offer, while start-ups such as Vonage will be left alone.

The CRTC did not immediately respond to a request for comment.


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In Canada, about half a dozen major carriers dominate the market, to a greater degree than the Bells dominate the U.S. market, which could explain why regulators might want to take a tougher line with incumbents.

The handicapping has begun on just what the CRTC will decide. Net phone analyst Jon Arnold, based in Toronto, is among several people interviewed Friday who believe the commission will favor the upstarts, while taking a harder line with incumbents' VoIP.

"My sense is that the status quo will prevail from the CRTC, and that's the story I'm hearing from others as well," Arnold wrote in his blog. "Essentially, this means that the Canadian ILECs (incumbent local exchange carriers) will be held to a different set of rules and regs than everyone else, which ultimately makes it impossible for them to be competitive in offering VoIP to consumers."

The commission's May 12 deadline to act was set last April, when in a nonbinding decision the agency opted to regulate most VoIP services. At the time, the CRTC wrote that it thought VoIP calls share enough "functional characteristics" to their circuit-switched competitors to merit regulating.

"VoIP service providers...should be subject to the regulatory framework for local competition," the commission wrote then.

But the agency has since come under enormous pressure from Canadian cable operators, Vonage and other VoIP interests. Adhering to government regulations is an expensive proposition, VoIP upstarts have argued, something that would quickly thin out the beehive of start-ups and force weaker providers to pare back their unlimited calling plans to just the United States, where VoIP remains unregulated.

On the other hand, Canada's incumbent phone operators believe the commission should level the playing field by regulating the VoIP providers.

A decision that favors cable operators and Vonage reportedly could keep at least one traditional telephone operator, Telus, from getting in the VoIP game for now.