It has taken a while but someone – Globe & Mail columnist Derek DeCloet – has spelled out what the deregulation of Canada’s local phone market means: it’s highly unlikely there will be prices wars. Why not? It’s simple: the major carriers (Bell, Telus, etc.) can’t afford it because they’re struggling to grow revenue and cash flow any way they can. Think about it: if Bell decided to slash local phone prices by $2 a month to keep customers happy, it would be walking away from $300-million a year in sales. This explains why Rogers and Shaw have been able to sell digital phone service at premium prices, which feeds into their mantra of healthy ARPU and profitable growth. So, let’s just brush aside the idea of price wars because they simply don’t exist anywhere within Canada’s telecom landscape.
Update: Rob Hyndman has some thoughts as does Andy Abramson, who politely disagrees with my thesis based on the idea that Web-based services such as Skype will force prices lower. (Now, if we could only get SkypeIn in Canada!)