Vonage Canada Challenges Dual-Tiered Internet

Mar 07, 2006 | Inside: Business Strategies

This morning Vonage Canada filed a request with the CRTC to challenge Shaw Cable’s $10 “quality of service enhancement fee” for subscribers wishing to sign up for competing VoIP services over their cable lines.

Folks, this is a real-life case showdown about net neutrality, and it’s the first direct challenge I’ve seen. The issue is not as heated here in Canada, but the scenerio is no different. Now, the CRTC is being put on the spot to respond in the absence of any U.S. precedents. The FCC has conducted hearings on this bedrock issue, but decisions have not yet been rendered.

Vonage has been under a lot of scrutiny lately around its IPO plans, and they have fallen out of favor with a lot of people. Well, this time, I think they should get some support. I’m in their camp on this one, and Shaw’s surcharge looks pretty anti-competitive to me. And they don’t even have any ILEC VoIP competition yet.

Have a look for yourself and be the judge - what does this look like to you?

So for $10/month, Shaw subscribers now have the “opportunity to improve the quality of Internet telephony services offered by third party providers”. I didn’t know the quality was so bad in the first place, and it’s not like they’re improving their network just for this. They’re just saying that they’ll provision Vonage Canada’s service just as well as they’d provision their own VoIP service—over the same network—but you have to pay extra for Vonage Canada—or other third party providers.

So, are all those happy people in the photo on this web page smiling because they can finally get good quality Vonage Canada service? Or are they laughing at you for going along with this deal?

As Vonage Canada points out in the press release (which hasn’t been posted yet), there are some basic questions the CRTC needs to address:

• What does Shaw’s so-called “enhancement” service consist of, from both a technological and service implementation perspective?

• What evidence does Shaw have to prove its “enhancement” service actually delivers on the promise of enhancing a customer’s use of a non-Shaw phone service provider and to what extent?

• What is the justification for a recurring charge to the customer for a service that it appears may consist of a one-time configuration of the Shaw-approved cable modem used by Shaw’s high-speed Internet customers?

• What is the take-up rate past, present and likely future of Shaw’s enhancement service, and what is the likely effect of the service on competition in local VoIP services?

These seem like the right questions to me. Sure, any facilities-based carrier has the right to earn a fair return and operate the network as they see fit -within reason (and that of course, is the rub here). And sure, pureplays like Vonage are handicapped on the QoS side. But there are many gray areas here where behavior is not in the best interests of the consumer, and that’s where we turn to the CRTC for guidance. Their track record on IP hasn’t been that inspiring, so let’s just cross our fingers on this one.

This has been a featured post from Jon Arnold, Principal, J Arnold & Associates. To visit the weblog maintained by Jon Arnold click here.

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