February 04, 2009
World's Most Innovative Telecom Service Providers Prognosticate at ITEXPO East 2009
By Richard Grigonis, Executive Editor, IP Communications Group
At ITEXPO East 2009 in Miami, Florida (held February 2-4), a group of innovative telecom service provider representatives assembled on stage to provide a fascinating roundtable discussion ranging over diverse topics such as the latest technological developments in next-gen solutions, market challenges brought on the current economic climate, how the new administration in Washington may affect telecom, competitive pressures, the rise of mobility, next-gen wireless broadband technologies, some accounts of real-life implementations and speculations on what will happen next.
Moderated by communications industry blogger and consultant Andy Abramson, the impressive group sat at a long table on stage facing a standing room-only crowd. Seated left-to-right, the participants were as follows:
• Huw Rees, Vice President of Business Development for 8x8, Inc. (www.8x8.com). “We are the provider of the Packet8 hosted services,” said Rees. “We primarily provide hosted PBX (News - Alert) services and more recently, trunking services for the Small and Medium-Sized [SMB] market. Our claim to fame is that we are a publicly-traded company, and we’ve been in business for about 20 years. We’re profitable and cash-flow positive, which is a very good thing to be at this stage.”
• David Byrd, Vice President of Marketing and Sales for Broadvox (News - Alert) (www.broadvox.com). “We have two major lines of business,” said Byrd. “We’ve been a wholesale carrier for over eight years. In 2007 we announced SIP trunking offering and now we have a nationwide deployment of that as well.”
• Matt Bramson, Chief Sales Officer, InPhonex (www.inphonex.com). “We are an Internet telephony service provider,” said Bramson. “We primarily work through a network of 3,000 resellers, and we’ve been doing that for five years. We were founded by two successful technology entrepreneurs. We provide a complete range of services, from SIP trunks through residential line replacement services. We are also cash-flow positive, and are growing very fast, particularly in Latin America.
• Dan Borislow, CEO and Founder of MagicJack (www.magicjack.com). “I guess I’m one of the few people in the room involved in the voice over broadband for the consumer market,” mused Borislow. “Our company is called MagicJack, and the parent company is YMax (News - Alert) [also founded by Borislow]. We also have some subsidiaries, such as Stratus Technologies, a company we purchased that provides the ‘glue’ for the network. We also acquired in 2008 a proprietary chip company called TigerJet and we also have our own software company, SJ Labs, which we acquired in 2007.
• Santiago Olaguibel, Managing Director of Communication Services for Telefonica (www.telefonica.com). “I represent Telefonica in the U.S.,” said Olaguibel. “We’re a global provider for fixed mobile data Internet services in Latin America, Europe and now Asia. We are about an $85 billion dollar company, with presence in 14 countries. Our sales office in the U.S. is mainly to service the global Enterprise market. We are now entering the U.S. consumer market in a new venture with Microsoft (News - Alert) called Voype.”
• Michael Rouleau, Senior Vice President, Business Development and Strategy for tw telecom Inc. (www.twtelecom.com). “We’re a competitive service provider in the U.S.,” said Rouleau. “We have a domestic footprint of 75 markets around the U.S. reaching about two-thirds of all U.S. businesses. Our focus is really around building fiber infrastructure out to the end-user’s buildings, and serving medium-to-large enterprises. We leverage our Ethernet strategies to deliver convergence to those enterprises.”
Abramson started things off by asking the audience for a show of hands to determine the proportion of audience members present representing service providers (about 20 percent), those who sell to service providers (about 40 percent), those in the enterprise integration space or who provide to enterprises (about 25 percent), those who focus in some way on the consumer market (about 5 percent), and those who were there simply to learn about the industry overall and get a sense of what is happening (about 10 percent).
Then, after introducing each member of the panel, Abramson began the session proper…
Abramson: Obviously, the big question concerns the present economic situation. Everybody is worried about money. How are we going to make it? How are certain providers making money now? Huw Rees said his company, 8x8, is profitable. Can you give us a sense of how you’re making money?
Rees (8x8): Some ‘roadbrush’ has been laid in the way of those service providers specifically looking at the Vonage model. As I’m sure everyone knows, they don’t make money. I think that’s been a bit of a tarnish to the overall VoIP industry. At 8x8 we don’t view it as being a ‘doom-and-gloom’ scenario that all voice-over-IP service providers are subject to. There’s plenty of money to be made if you service the right markets, doing it in the proper way. What we’ve decided to do, of course, is to serve the small and medium-sized business market. The way you make money in serving that SMB market is by providing value-added services as opposed to simply engaging in a ‘race to zero’ in terms of the cost of voice to users. Clearly, providing hosted PBX services with a feature set that is of value to the small business is key to us making decent margins and real money. That’s a model that works, and I’m sure there are other models that work too, but that’s what we have found to be successful and that’s how we make money today.
Abramson: Matt, your company InPhonex is doing well after five years, how do you succeed in this environment?
Bramson (InPhonex): I think it’s a matter of discipline. As was said earlier, it’s a matter of identifying strategically profitable opportunities and focusing on those. Our secret has been our focus on resellers. Because we have a fairly large number of resellers, through them we get exposed to profitable situations. We do what we can to help our resellers. There are many innovative entrepreneurs out there who take our services to market and high percentages of them are finding profitable digits, so we’re not forced into a price-based competitive model.
Abramson: Santiago represents the international provider community. What are you doing at Telefonica to drive profitability and be successful? There are various divisions within Telefonica: you’ve got mobile, enterprise, in-country, etc.
Olaguibel (Telefonica): We have two divisions that we focus very keenly on. One is residential. We need to remember that the end user is really the focus here - offering new services and combining services, such as the fixed and mobile combinations, are important for end-users, and we provide Internet services to residents using DSL and we’re always improving the infrastructure to best serve our markets. We like to focus on what’s new in the industry, and while we deploy as quickly as we can, it’s difficult when your company is very big like ours and you’ve got to turn on a dime. In the U.S., there’s a very wide field for us in which to work. Currently we have about a 4 percent market share for enterprise international services, and the main players, of course, are AT&T and Verizon in the U.S., and BT (News - Alert) and Orange in Europe, and these companies have greater market share than we do in this area. So there’s a lot of room for us to grow.
Abramson: Mike, at tw telecom you’re really focused on the top tier. You’re really going after big business with fiber to the buildings, metro Ethernet and those kinds of things. What are you guys doing that’s making money?
Roulow (tw telecom): There are several things we do to make money. First, part of our fabric consists of analyzing the infrastructure deployments — how we spend our money, making sure that it’s a profitable business for us. We’re upfront with our customers about that. They want to make sure that whoever they’re dealing with is going to be around for a while. So when focus on putting fiber in the ground and then lighting up a building, they want to know that we’re at least making a profit on it too, so that we’re definitely going to be around for a while. But more importantly, it’s a matter of listening to your customers. You need to deliver the solution that the customer needs to run their business better, they need to be as efficient as possible, particularly these days, where we’re literally helping them save money. You end up looking at a total cost of ownership position, not just ‘Here’s what the service costs and it’s cheaper than the other guy.’ Instead, we’ve got to look end-to-end and ask the customer, ‘How can I help you reduce your capital expenditures and how can I give you better scalability? How can I help you focus on you being more successful?’ That’s what we do.
Abramson: What’s MagicJack doing in this space? How are you maintaining profitability?
Borislow (MagicJack): Someone earlier mentioned Vonage. I think they got things backwards. They started selling product before they had a cost structure in place. We’ve built the largest U.S. national CLEC. We’re certified to run in 50 states. Our cost structure is the lowest in the business. We do everything very efficiently.
Abramson: What about Broadvox? How does one make money these days in the service provider industry?
Byrd (Broadvox): We have two business lines: the wholesale business and the retail business. They have different strategies for making money. On the wholesale side, we offer a very competitive product nationwide. We also have alternate businesses that support it, so we have a CLEC that allow us to get fuller access in different areas of the country. But what’s really important is that we have a history of offering a quality product. As we began to upgrade our network in order to improve its reliability back in 2007, there were certainly some times when people could see the transition from one softswitch to another. But once that was completed by mid-2008, our business actually took off again and we had record quarters in the third and fourth quarters of 2008. And remember, we’ve been in business for a period of about eight years.
On the SIP trunking side, we use an indirect model. We signed up a number of Value-Added Resellers [VARs] and we have a very sophisticated training mechanism to we educate our customers and prospects with the value of us doing that. The bottom line is that, in these economic times, we’re able to walk into a room, demonstrate to someone how you can save them 40, 50 or 60 percent off of their current telecom costs, and that’s fairly important, since Telecom Expense Management [TEM] is a big deal this year and it will probably be a big deal in 2010 as well.
The providers went on discuss many other aspects of today’s IP communications industry. For example, some companies may have been hesitant about putting the money-saving aspects of VoIP to the test by adopting it and incurring an initial installation and training cost. Now, however, they are perhaps being compelled by the current economic climate to finally install systems and services and to think in terms of long-term strategic planning involving the use of IP communications as a business strategy and a way to save money through such practices as SIP trunking.
Richard Grigonis is Executive Editor of TMC�s IP Communications Group. To read more of Richard’s articles, please visit his columnist page.
Edited by Stefania Viscusi