The Internet and the Telephone businesses are merging. Some would say that one is eating the other but opinions vary on which is doing the eating. For almost 2 years ending early this year I was involved with a startup Competitive Local Exchange Carrier (CLEC) as VP of Internet Services.  During this time I put together the portion of the business plan dealing with Internet products, services, and infrastructure design and implementation. I've spent numerous meetings in front of potential vendors, customers, venture capitalists, associates, and even competitors.

This has given me an incredible insight into what is happening in this industry. In a previous life I spent 3 years as a telephone company employee, installing phone switches, wiring businesses and houses, and dealing with the general public as a phone repairman. During the early part of the '90s I was involved with Canada's first commercial ISP as it reacted to and then drove the changes in the Internet from its infancy as an unknown research facility to its current identity as the World Wide Web.

So what is happening you ask.

Here in Canada the most obvious thing happening in the telecommunications industry is that prices for services are consistently falling, and business services are being more and more offered to the residential customer. The long distance prices have almost subsided to the level they are in the US to the South; less than $0.10/minute with even some flat rate offerings. High speed data lines have fallen in most instances to the point where a T1 (1.5 Mbps) to the Internet can be had for substantially less than $1000/month, and high speed shared access lines such as ADSL and Cable Modem can be had for around $100/month (for business use - residential is even less). 

I think these price drops in data services have more to do with competition than they do with anything else; competition engendered by the Internet. We're about to see similar drops in business phone service prices as the Competitive Local Exchange Carriers (CLECs) finally get into the market in a big way. How this will impact the consumer/residential prices is still up in the air. The offering of traditional business services to the residential market, things like voice mail and call forwarding for instance, looks like a proactive attempt to increase the phone company's revenue by bundling so that competition for the basic dial service won't as drastically impact their net profit. It forces the new competition to offer similar bundles, confusing and fragmenting the market. It also reflects the fact that the SOHO (Small or Home Office) market is burgeoning.

The latest item in the competition arena is that the Canadian Radio Television Commission (CRTC) has told the cable companies they must offer their Internet connection services wholesale to other ISPs at a minimum 25% discount. This puts it on a similar footing to the ADSL offered by the phone companies and being resold by ISPs. While this might not actually impact prices, it certainly will impact the various service offerings you will be able to get for your money.

The entry into the Internet business by the massive telephone companies was looked on as the death knell of the small ISP. In fact there are more and more small ISPs entering the market all the time. Many will ultimately fail, some will be gobbled up and some will find their own comfortable niche and endure for years. Some will combine telephone products with Internet products, bundle in hand holding and installation, and make a good business out of their specialties. The reason the small companies will continue is simply that the big ones can't do it all. They can't move fast enough for some of their customers, and they don't provide the right mix of service and support for others. 

The technology sector has been driving the economy in many ways for quite a few years now. I don't see it slacking off at all, in fact I see the pace picking up. There are still lots of potential customers out there that need cost effective solutions to every day problems of getting and keeping customers, building products, tracking progress, and dealing with one another.