Local-loop competition gets Primal

A telecom software house out of Mississauga, Ont. means to improve profits for data providers with no-hassle voice over IP (VoIP). But the company also says its latest product has an added bonus: it could help improve competition in the incumbent-owned local phone business.

Primal Technologies Inc. announced that its “Primal Service Node (PSN),” which sits between an ISP and the public switched telephone network (PSTN), now offers VoIP capabilities.

Primal says ISPs could subscribe to the PSN and offer telephone service to end-users. The users would dial out via IP phones from Cisco Systems Inc., 3Com Corp. or Pingtel Corp., and the calls would travel the ISP’s data conduits to the PSN. There the box would hand off calls to the PSTN.

Since the PSN handles the interconnection between the ISP and the PSTN, the ISP need not concern itself with the high costs of connectivity.

“We are trying to price it as a turnkey solution,” said Michael Conway, Primal’s vice-president, product development. “We even include (the price of) installation.”

Subscription costs, he added, vary according to the subscriber’s needs. Although Primal is chatting up some cable companies about the PSN, Conway said it is probably five months too early to talk about success stories.

However, he did mention that the PSN offers a big plus for Canada’s telecom industry, in that the product might help foster competition in the local loop, an area long bereft of serious competition.

Local phone service usually comes from a handful of providers, although that’s not by design. During the late ’90s the Canadian Radio, television and Telecommunications Commission (CRTC) deregulated the local telephone market, essentially telling ILECs such as Aliant Inc. and Telus Corp. to lease their lines to CLECs.

The move was supposed to engender healthy competition and give end-users greater choice, but the CLECs found it difficult to battle the ILECs. Engineering costs and lawyers’ fees associated with becoming a CLEC sank many telecom newcomers in 2000 and 2001, Conway said.

“Some firms were so infatuated with becoming a CLEC that they spent a lot of money following those rules. Some of them…went bankrupt.”

Primal’s PSN offers a way for ISPs to join the fray in the local loops, without spending all that money and getting tied up in red tape. For one thing, the CRTC does not regulate data lines, nor the information travelling them, be it data or voice. So ISPs could offer voice service without CLEC designation.

“If the service provided is strictly between PCs and does not use the PSTN for any switching, it is considered a pure Internet service and is not subject to any CRTC telecommunications regulations,” the CRTC said in an e-mail to Network World Canada.

Yes, Primal’s phone calls would travel the PSTN, but they would pass through the PSN first. Primal itself takes care of the interconnections, regulations and the process of leasing line space from the ILECs. According to Conway, the PSN offers a low cost of entry for data providers bent on trying their smarts at voice services.

“Now that all of the CLECs have crashed, local phone companies have to make money in two years, not 20,” he said, pointing out one of the constraints new phone companies face when seeking capital from Bay Street.

John Riddell, an analyst with Angus TeleManagement Group Inc. in Pickering, Ont., said Primal’s success depends on whether ISPs see a need to offer voice services. That need, he added, depends on the end users themselves.

In some cases, the technology is compelling. Riddell said he knows a teenager who was banned from using her parents’ phone after racking up huge bills with calls to her boyfriend in the U.S.

Now, “she uses VoIP,” he said. The girl employs a high-speed Web connection and “she doesn’t care if the quality is poor, she gets to talk to her boyfriend.”

However, Riddell pointed out certain advantages to becoming a CLEC, such as access to 911 emergency phone service and number “portability” – as CLEC subscribers, end users can keep their phone numbers when they move.

Primal’s Conway agreed that non-CLEC status has its limitations. Primal advocates ISPs registering to become CLECs once the business model is proven. Data providers would offer the service as a low-cost second phone line for use by teenagers or for business purposes, but not as a substitute for plain old telephone service.

“The strategy is, you got it to work, you’re making money, it’s time to bring it up to the next level,” he said.

For more info on the PSN, see http://www.primaltech.com.