Web play targets Bell, Telus
Primus unveils lower cost, Internet-based telephone service for residential users
Mark Evans, with files from Sean Silcoff
Financial Post
January 9, 2004
Ted Chislett, president of Primus Telecommunications Canada Inc., outlines the company's foray into Internet-based residential phone service.
CREDIT: Peter Redman, National Post
Upstart Primus Telecommunications Canada Inc. unveiled a new, lower cost residential service yesterday that is bound to shake up Canada's $4-billion local telephone market.
Primus, which has 900,000 long-distance and Internet access customers in Canada, said its TalkBroadband service will offer average savings of 25% compared with traditional service from carriers such as Bell Canada and Telus Corp. TalkBroadband will ride on high-speed networks offered by the carriers and cable companies.
"TalkBroadband begins a new era for Canadian consumers looking for a reliable, simple and less expensive alternative to traditional phone service," said Ted Chislett, Primus Canada president.
Once a monopoly service, local telephony is becoming increasingly competitive as new technology lowers barriers to entry. In addition to Primus, new entrants in Canada will include Vonage Holdings Inc., and a joint venture between Allstream Inc., Inukshuk Internet Inc. and NR Communications LLC. Videotron ltee is also looking whether to introduce local telephony service over the Internet, but has not yet made any decisions whether or how to proceed.
Eamon Hoey, a senior partner with Hoey Associates, said the local telephony market is on the verge of a significant overhaul.
"I think this is the thin edge of the wedge," he said. "If any one of the incumbents out there loses 10% of their market, they are in serious trouble.
"To me, management, employees and union types in the telephone companies ought to give their heads a shake. They might be able to say it's no threat but Toyota was no threat and neither was Honda when they came to North America."
At the heart of the competitive landscape is Voice-over-Internet-Protocol, or VoIP, which lets voice traffic travel over high-speed Internet networks. Major carriers are jumping on the Internet bandwagon because it lowers operating costs and lets them offer services such as voice and unified messaging.
This week, Verizon Communications Inc. unveiled plans to migrate its networks to Internet-based technology by purchasing equipment from Nortel Networks Corp. -- a deal that could be worth as much as US$5-billion over five years.
Primus' move into local telephony is bound to quickly reverberate throughout the telecom market. Bell Canada and Telus may have to accelerate their VoIP strategies while Rogers Cable Inc. and Shaw Communications Inc. may have to launch a local telephony service this year, rather than waiting until 2005 or 2006.
Rogers and Shaw are particularly vulnerable because consumers who want to use a high-speed connection from a telephone carrier will still need to have a local line -- at least until the CRTC starts to enforce a decision that forces carriers to provide high-speed service without a local line.
"If you are Rogers, you will tell your people to hurry up with all the work you are doing because they have the worse of both worlds," said telecom consultant Mark Goldberg. "They are carrying all the traffic of voice and they are getting none of the revenue. I think they will have to get something going right away to counter Primus' head start."
Alexander Brock, vice-president of business development with Rogers Communications, said Primus' telephony strategy makes a lot of sense because it will help them keep their long-distance customers from leaving to rival services. He said, however, Rogers is sticking with its plan to move into telephony next year.
"We are still happy with the date," he said, adding that Rogers hopes to attract customers by offering a reliable, high-quality service over its cable network.
Primus' residential packages will cost $29.95 to $42.95 a month depending on how many calling features they include. To use the service, a consumer has to connect a router designed for Primus into their high-speed Internet connection. The service requires power and it does not feature 911 service.
What is intriguing about the company's telephony strategy is its simplicity and low cost. Mr. Chislett said the router costs $150 and he expects prices to decline as more people use the service.
While VoIP is gaining momentum, it is unclear about how it should be regulated in Canada. In November, Bell asked the CRTC to launch a public hearing to consider what rules will apply to local telephony service providers using VoIP.
"I want them to have a proceeding where everyone is involved to determine what are the regulatory issues, will [VoIP] be treated as a regulatory service or the Internet, and what are the rules regarding service to high-cost service areas," said Lawson Hunter, an executive vice-president with BCE Inc.
mevans@nationalpost.com |
