There was a time — not too long ago — when figuring out what to do with your home phone service was a simple matter of contacting your local big telephone monopoly, asking when they could send someone over to hook you up, and arranging the time off work for the day the technician was scheduled to show up. Or not.

Your toughest choices were limited to touch-tone or pulse dialing and whether to get one of those new-fangled princess phones for your teenage daughter. Maybe in that new yellow to match the daisies in her bedroom wallpaper.

Way back in the 1990s, the phone industry was opened to competition. By the end of that decade, the internet was offering promises that perhaps, one day, it could handle voice communications — and more cheaply than traditional phones.

Early internet phone applications were a novelty, allowing people to search for others to connect to online. Quality was poor and delays made conversations seem like ham radio conversations of days gone by.

But the explosive growth of high-speed internet changed all that. In January 2004, Primus Canada became the first company to offer VoIP — Voice over Internet Protocol — service in Canada.

VoIP allows people to make telephone calls using a broadband internet connection instead of a regular analog phone line — at a fraction of the cost. And with broadband penetration nearing the saturation point in Canada, the potential market for internet-based phone service was huge.

Billions of dollars at stake

A multibillion-dollar industry is up for grabs.

In 2002, about 95 per cent of the local residential and business phone markets were controlled by former monopolies such as Bell and Telus Corp., according to the telecom regulator, the Canadian Radio-television and Telecommunications Commission.

The two markets were worth nearly $10 billion that year, the CRTC says.

It could be even more lucrative with VoIP, because the technology doesn't need the expensive wires and elaborate switching equipment required by traditional analog lines.

The savings could translate into lower prices to lure consumers, who can typically expect to save 25 to 40 per cent on monthly phone bills when calling through the internet.

VoIP could mean big savings, especially for businesses, substantially lowering long-distance expenses. For instance, the technology allows a customer to select the area code they want for their phone number. It means that a company based in Saskatchewan whose main client base is in Toronto, could pick a number in the 416 area code. Calls from Saskatchewan to Toronto clients would be treated as local and not subject to long-distance charges.

The former telephone monopolies have not raced into the VoIP residential market. Telus hasn't yet offered a residential VoIP product, but it does offer one called IP-One to its business customers.

Bell Canada offers its "digital voice" service — but only in limited markets. However, it's not much cheaper than Bell's regular old-fashioned offerings.

That's because of a May 2005 CRTC ruling that said if the old telephone monopolies offered VoIP service, they would be regulated, just like local phone service delivered the traditional way. CRTC regulations locked the big former monopolies into a regulatory format until their competitors captured at least 25 per cent of the market. The CRTC made the ruling despite a 1999 decision not to regulate the internet.

The new companies in the game had less than 10 per cent of the market by the time federal Industry Minister Maxime Bernier said the government would overrule the CRTC decision — on Nov. 15, 2006 — and free the old monopolies from the regulatory grasp of the CRTC.

That would put them in the same position as cable television companies like Rogers, Shaw, Cogeco and Videotron, which all offer VoIP services.

In addition, dozens of smaller companies — including Vonage, Primus Canada, Telehop, Virtutone and Comwave — have set up shop and are free to charge what they want for local and long-distance VoIP service. Some offer packages starting at $9.95 a month — well below the $40 per month Bell charges for its digital phone service, as regulated by the CRTC.

Free market to decide

Bernier said the government's decision to free the old monopolies from CRTC regulation would stimulate competition, leading to lower costs and fewer regulatory proceedings.

"In a competitive sector, there is no reason to regulate some companies while others can offer the services they want at the prices they want," Bernier said. "It is time to have a level playing field from which consumers and small businesses will benefit."

But the decision did not sit well with the companies fighting for a bigger slice of the telephone pie.

"The government has demonstrated it does not understand the telecommunications landscape," John Lange, president of the Canadian Association of VoIP Providers, said. "Letting the Telcos exercise their significant market power without regulation means that competition has been dealt a serious blow."

Lange says the decision means that every time a VoIP provider lands a customer from one of the big telephone companies, that company will be able to contact the customer and offer deeply discounted rates to try to persuade the customer not to switch. Under the old rules, the big phone companies had to wait a year before trying to win back customers.

The competition is not limited to Canada. Skype, a major international player with more than 100 million registered users, offers software that can be downloaded for free. It works over any broadband internet connection and allows unlimited free calling to regular phones within North America and other Skype users anywhere in the world. It also offers low-cost calls to regular phones outside of North America.

Skype originally worked only on computers equipped with headsets, but in recent months, special phones have hit the market that are designed to work with the service. You don't need to be near your home computer to use them — any wireless hotspot will do.

Skype has the muscle of eBay behind it. The world's biggest online retailer paid more than $4 billion for the company earlier this year.

But the market may have its limits. AOL Canada pulled the plug on its Total Talk VoIP service on Oct. 22, 2006.

The phone wars aren't over yet.

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