Online Services are great for Canadians, but threaten Big Telecom

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Big telecom companies are feeling the squeeze as online services are offering Canadians alternative, cheaper ways to communicate and get access to diverse media content. These include video services like YouTube, AppleTV, and Netflix, and Internet-based social messaging services. These services provide an easily customizable and far more affordable alternative to content services offered by Canada’s media conglomerates.

According to the Boston Consulting Group, “traditional telco operating models that were shaped in an era of government-owned monoliths are showing signs of severe strain”. The Group highlights a range of challenges that have been prompted by online services, which may be bad for Big Telecom’s aging business models, but are great for Canadians.

One of Big Telecom’s biggest challenges? People are saving money by using online messaging services rather than more traditional phone services. A study from market researcher Ovum shows that in the U.S., cell phone users saved $13.9 billion overall in text-messaging fees because of their' ability to access Internet-based social messaging services.

Text messages cost little for Big Telecom, but text messaging packages are sold to users at relatively high prices: we’re being price-gouged. Online services, however, give a clear example of how applications on the open Internet create possibilities to make communications in general more affordable.

The Boston Consulting Group also highlights the arrival of a low-price operator on the cell phone market in France, which drove prices down. However in Canada, as noted in a Mobilicity press release, "unlimited data, talk and text plans are still relatively new... and the majority of Canadians are stuck in expensive, restrictive contracts”.

This pressure from increased online competition means that Big Telecom will have to improve its services, building next-generation networks in order to compete. And this means better quality of service for us.

Unfortunately telecom/media conglomerates, rather than competing in ways that benefit the public, are resisting the challenges posed by Internet-based services by bundling their services together, and trying to make more money from our Internet use. This means higher prices and less choice for Canadians.

As we’ve reported, the CRTC has come under pressure from Big Telecom lobbyists to weigh in on the use of online services (or “over the top services” as they like to call them), and essentially regulate our use of the Internet, because of their potential impact on increasingly outdated business models. Luckily for the future of our digital economy, the CRTC has been resistant thus far.

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