The Phone Wars

8 Oct ’05

The Globe runs a long story today on the coming battle over residential phone service in Canada. It’s a very good piece, but it focuses on the phone and cable companies and neglects to mention the potentially most disruptive piece of the pie – the third party providers, such as Vonage, who do not control their own networks.

The ideal situation for the majors would presumably be managed competition that would see them each having a share of the market, with all other competitors shut out. The two-competitor market – something they are increasingly comfortable with in the TV and high-speed internet markets – would be good for them, bad for consumers. Which is why I’ve been expecting to see the cableco’s introduce their VoIP offerings on not-too-aggressive terms – just enough to start taking business from the phoneco’s, and not so aggressive that they drive the market to the bottom.

Enter the Vonage’s of the world, who (i) don’t care about leaving the phoneco’s and cableco’s to enjoy their comfy status in the market, and (ii) are completely dependant for their success on network neutrality by the phoneco’s and cableco’s.

Their entry will, to my mind, be the market’s real test.

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