Bell Canada has jumped into the Internet-based phone market for consumers as it seeks to defend its territory from the threat posed by new rivals.
Bell said yesterday the phone service is available in three Quebec cities -- Sherbrooke, Quebec City, and Trois-Rivieres.
The new service is part of a sea change in the phone industry. Companies don't need traditional circuit-switched networks to offer phone service any more as calls can now be made over high-speed Internet connections, a service known as voice over Internet protocol (VoIP).
VoIP has opened the door to many new entrants to the phone market, including cable-television companies Shaw Communications Inc. and Vidéotron Ltée, and upstarts like Vonage Holdings Corp.
As a result, VoIP represents serious competition for the former phone monopolies. Cable operators' VoIP services are expected to attract 1.37 million consumers by the end of 2007, according to Brahm Eiley of Convergence Consulting Group Ltd.
Industry observers called Bell's VoIP launch a defensive move. Vidéotron has launched its phone service in parts of Montreal, and is expected to roll it out in other markets in Quebec, which has hitherto been Bell territory when it comes to telephone service.
Vidéotron's phone service is having success because of its attractive prices, UBS analyst Jeffrey Fan said.
He said Bell's service is "more of a defensive move and trying to protect [against] some potential losses that are to come should Vidéotron enter these markets in the future."
Consumers with a broadband connection from any provider can subscribe to Bell's VoIP service.
Mr. Eiley says Bell's VoIP offers a discount of as much as $13 compared to its traditional local service. But he questioned whether that would be enough to attract users given Vidéotron's pricing.
Bell's VoIP service, which includes features such as call forwarding, comes at different prices depending on the unlimited long-distance calling regions that subscribers choose -- $38 for Quebec, $40 for Canada, and $45 for Canada and the United States. Vidéotron's monthly rates range from $15.95 to $21.95 for those who only get the phone service. Subscribers can get five features for $9, and an unlimited Quebec long-distance plan that starts at $4.95.
Bell's service is about providing consumers with choice, according to Ron Close, president of VoIP for consumer markets. For proof, he cited VoIP features that aren't available on Bell's traditional local phone service, including routing voice messages to the user's e-mail.
Bell is launching its service as the Canadian Radio-television and Telecommunications Commission prepares to rule in the coming months on how it will regulate VoIP.
When the CRTC started proceedings a year ago it was of the view that VoIP should be regulated like local phone service. Mr. Close argued that Bell's VoIP service for consumers is a retail Internet application, which isn't regulated.
Bell's owner, BCE Inc., also controls Bell Globemedia, the owner of The Globe and Mail.
