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Canada Case Study IP TELEPHONY AND THE INTERNET: CANADA CASE STUDY January 2001 This case has been prepared by Craig McTaggart, Graduate Fellow, Centre for Innovation Law & Policy, University of Toronto Faculty of Law <[email protected]>. IP Telephony and the Internet is part of a series of country case studies produced in connection with the Third World Telecommunication Policy Forum (WTPF) on IP Telephony, Geneva, 7-9 March 2001. The WTPF case studies programme is under the direction of Dr. Ben Petrazzini, <[email protected]> Regulatory Affairs Advisor, Strategy and Policy Unit (SPU), ITU. Other IP Telephony cases, including China, Colombia, Republic of Korea, Peru and Thailand, can be found at <http://www.itu.int/wtpf/casestudies/>. The opinions expressed in this study are those of the author and do not necessarily reflect the views of the International Telecommunication Union, its membership, or the Canadian government. © ITU 2001 ii Contents Summary .................................................................................... 1 1. Country background ............................................................... 3 1.1 Geography and demographics ..............................................3 1.2 Political system ...................................................................4 1.3 Economy.............................................................................5 2. The Canadian telecommunication sector ............................... 6 2.1 Historical perspective and structure ......................................6 2.2 Responsibility for telecommunication policy and regulation ......6 2.2.1 Policy authority: Industry Canada ......................................... 6 2.2.2 Regulatory authority: CRTC .................................................. 7 2.3 The transition to competition ................................................8 2.4 International competition .....................................................8 2.5 Universal service support: The contribution regime ................9 2.5.1 Contribution reform............................................................. 10 2.5.2 The old regime (until 31 December 2000) ............................ 10 2.5.3 The new regime (from 1 January 2001) ............................... 11 2.6 Major market segments and indicators ................................ 13 2.6.1 Wireless .............................................................................. 14 2.6.2 Long distance ...................................................................... 14 2.6.3 International ....................................................................... 14 3. The Canadian Internet sector ............................................... 18 3.1 Historical perspective and structure .................................... 18 3.1.1 Early institutional networking ............................................... 18 3.1.2 Commercial Internet Service Providers (ISPs) ..................... 19 3.1.3 The Internet at work ........................................................... 20 3.1.4 Broadband/high-speed Internet ........................................... 20 3.1.5 Free ISPs ......................................................................... 21 3.2 Internet use ..................................................................... 21 3.3 Regulatory status of Internet services ................................ 21 3.3.1 Contribution exemption for Internet services ....................... 22 3.3.2 Impact of contribution reform on Internet services .............. 22 3.3.3 Access to broadband facilities .............................................. 22 3.3.4 Internet content .................................................................. 23 3.3.5 Internet technical infrastructureThe .ca domain ................. 23 3.4 National Internet connectivity ............................................. 25 3.5 International Internet connectivity ...................................... 25 3.6 Public networking .............................................................. 25 3.7 Advanced networking ........................................................ 26 4. IP Telephony in Canada ....................................................... 30 4.1 Introduction ...................................................................... 30 4.2 Regulatory status of IP Telephony in Canada ....................... 30 iii 4.2.1 General .............................................................................. 30 4.2.2 CRTC decisions on IP Telephony.......................................... 31 4.2.3 International licensing regime.............................................. 33 4.2.4 IP Telephony under the new contribution regime .................. 36 4.3 The IP Telephony services market ....................................... 37 4.3.1 Indicators ........................................................................... 37 4.3.2 General views ..................................................................... 38 4.3.3 Local ................................................................................... 38 4.3.4 Wireless .............................................................................. 40 4.3.5 Long distance/international .................................................. 40 4.3.6 Enterprise networks ............................................................ 45 4.3.7 Carrier backbones .............................................................. 45 4.4 Impact of IP Telephony on existing telecommunication environment ......................................... 45 5. Conclusion............................................................................. 51 Annex I: List of people interviewed ........................................... 53 Annex II: List of acronyms ........................................................ 55 Figures 1: Telecommunication service industry key players .................. 13 2: Telecommunication services revenue by source, 1999.......... 14 3: Wireless subscribers, 1990-2000 ........................................ 15 4: Domestic long-distance services revenues, 1992-1999 ........ 15 5: International telecommunication traffic, 1995-1999 ............ 16 6: Internet Service Providers, 2000 ......................................... 19 7: Internet subscribers, 1999 ................................................... 20 Table 1: Some key facts about Canada ................................................. 4 Boxes 1: Telephone service in high-cost serving areas .......................... 7 2: Telecommunications Act: Key definitions ............................... 12 3: CRTC New Media decision .................................................. 24 4: Industry Canada news release: Connecting Canadians ...... 27 5: Regulatory rules for ISPs under the old contribution regime . 33 6: Revised Class A and B Basic International Telecommunications Services (BITS) licences .......................... 35 iv 7: Bell Canadas views on migration of voice traffic to packet-switched networks .................................................... 39 8: GT Group Telecom VoIP: not ready for prime time .......... 41 9: Gold Line Telemanagement Discount circuit-switched services ............................................ 42 10: Yapalot Communications Discount VoIP services ............. 43 11: Teleglobes views on migration of voice traffic to packet-switched networks .................................................... 44 12: Algonquin College VoIP network ......................................... 46 13: Bell Canadas views on IP Telephony in the Canadian telecommunications environment ............................... 47 14: CRTC announces that it will look at emerging technologies once more pressing issues are settled .................. 52 v SUMMARY Summary Canada has a highly competitive local, wireless, long distance, and telecommunication services sector, international) combined with all IP supervised by a proactive regulator Telephony public offerings from other acting under pro-competitive govern- types of carriers, while not substantiated ment policy. Canadians enjoy some of by any statistics, is generally thought the highest quality and lowest priced to be less than 1 per cent. telecommunication services in the While there has been relatively little world. This has been accomplished in commercial activity in Canada relating spite of the countrys immense size, to IP Telephony, there has been often harsh climatic conditions, and comparatively much more regulatory low average population density. activity. The possibility that packetized Canadian telecommunication policy speech technology, such as Voice over has always stressed the importance IP (VoIP), might be used to bypass of universal service. As competition the contribution regime has spurred has replaced monopoly, the system the regulator explicitly to address the employed to support that objective regulatory status of Internet and IP- (known as contribution) has become based services on several occasions. the most important remaining aspect Technological neutrality is a key of the regulatory regime. principle of Canadas telecommu- Internet Protocol (IP) Telephony came nications regulatory regime. The to prominence worldwide after most contribution collection mechanism was telecommunication markets were very recently (1 January 2001) already liberalized in Canada. As such, reformed to preserve that principle by IP Telephony has almost no history of switching from a per-minute charge being used as a means of bypassing on long-distance
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