US embassy cable - 05OTTAWA1472

UNCLAS OTTAWA 001472 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/CIP, EB/BTA/DCT - FAIRFAX/SHEEHAN 
AND WHA/CAN 
 
STATE PASS USTR FOR J.MCHALE AND S.CHANDLER 
 
FCC FOR INTERNATIONAL - D.ABELSON, J.MANN AND P.COOPER 
 
USDOC FOR 4310/IEP/OOC/WH/J.BENDER 
 
USDOC ALSO FOR NTIA - BURR 
 
GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: ECPS, ETRD, CA, Communication 
SUBJECT:  VOIP:  CANADA CONFIRMS IT WILL REGULATE INTERNET- 
BASED TELEPHONY 
 
REF:  04 OTTAWA 0924 
 
1.   Canada's communications regulator has confirmed a 
decision which it foreshadowed in April 2004 (reftel):  that 
its existing telecoms regulatory framework will cover "voice 
over Internet protocol" services when VOIP is used for local 
calling.  (The decision, by the Canadian Radio-Television 
and Telecommunications Commission or CRTC, is available on- 
line at www.crtc.gc.ca -- Telecom Decision 2005-28). 
 
 
2.   While this approach contrasts with the U.S. FCC's free- 
market approach to VOIP, the CRTC stresses that its 
intention is not to regulate, but to create sustainable 
competition in local phone service - which in Canada remains 
dominated by two incumbents.  This view is supported by the 
fact that the major telcos, Bell and Telus, expressed 
disappointment at the decision.  Bell and Telus both offer a 
wide range of wireline, wireless and Internet services 
across most of Canada and, while they are challenged in some 
areas by cable firms and smaller players, they clearly 
thought they could do well in unregulated VOIP. 
 
3.   Competition in communications services in Canada has 
been driven as much by technology as by regulatory change. 
While the CRTC adopted pro-market rhetoric a decade ago, 
progress has been slowed by a number of factors, including: 
 
-- Restrictions on foreign ownership (currently 
limited to 46.7 percent), which mean that U.S. and 
other foreign-owned players can only enter the market 
as minority partners. 
 
-- Continuing desire by the GOC to use its regulatory 
control over large, profitable incumbent telcos in 
order to achieve public policy goals (such as 
promoting "connectedness" of poor and remote 
communities). 
 
-- Resistance to deregulation by Canada's "cultural 
policy" establishment, which believes that loosening 
restrictions on the telecom industry will inevitably 
loosen the GOC's grip on broadcasting and other media. 
 
-- Lack of reform of the CRTC's cumbersome structure 
and very slow processes.  Most players acknowledge the 
need for such reform, but concrete steps have been 
delayed for a variety of political and institutional 
reasons. 
 
4. In this context, it may not be "deregulation" but 
rather technology-driven change -- such as the arrival 
of VOIP and the offering of telephone service by cable 
TV and perhaps even by electric power firms - that 
brings Canadians greater competition in phone service. 
 
DICKSON