Copyright 2005 Toronto Star Newspapers, Ltd.

The Toronto Star

September 8, 2005 Thursday

Tyler Hamilton, Toronto Star

From Lexis Nexis

Bell Canada is expected to announce today the full-scale expansion of its digital voice service across Ontario and Quebec, its most determined effort yet to protect a lucrative local phone business under siege by new technology.

Sources say Canada's largest phone company plans to introduce two Voice over Internet Protocol services: One that can carry phone calls over any high-speed connection and one that's tied to Bell's own high-speed Sympatico service.

"It's like your home phone but better, with all the additional features (of VoIP)," said one source familiar with the launch, who asked to remain nameless.

Bell, the operating arm of Montreal-based BCE Inc., has interim approval from the federal telecom regulator for the launch of Bell Digital Voice as early as today, sources say.

A version of the service was launched five months ago in Quebec City, Sherbrooke and Trois Rivieres. Since then, Bell has faced considerable competition from new broadband phone services launched by Videotron Ltd. and Cogeco Cable Inc. of Montreal and Toronto-based Rogers Cable Inc.

By the end of this year, Videotron alone is expected by analysts to lure 140,000 phone customers away from Bell. Rogers, which launched its Rogers Home Phone services in July, is now going after Bell's largest market: Toronto.

"It is harder for Bell to win back the customers than it is for cable companies to win them in the first place," states a recent report from telecom consultancy The Seaboard Group, which advises phone companies to come out aggressively with their own VoIP services.

But unlike the cable companies, which gain new revenues with each subscriber captured, Bell faces the difficulty of having to cannibalize its own base of local phone customers to keep them from leaving, something BCE chief executive Michael Sabia considers a necessary evil.

Sources say Bell will try to maintain the revenues it can get from each local phone customer by offering features that neither traditional local service nor the cable-based phone services provide.

Such features would include interactive Web portals, email-based voicemail, advanced call filtering and call logging -- many of the same features offered by Vonage, Primus and other VoIP services.

Bell might also look for new sources of revenue by selling an "access-independent" service outside its operating territory, perhaps in competition with phone rival Telus Corp.

Bell would not confirm the nature of its announcement today, saying only that it will be related to a "disruptive technology" aimed at consumers.

The Canadian Radio-television and Telecommunications Commission ruled earlier this year that VoIP, from a regulatory perspective, should be treated like traditional phone services. As such, Bell would have to get CRTC approval before setting or changing VoIP pricing.

Bell, along with Telus and others, have appealed the ruling, arguing that it restricts their ability to compete.