This article originally appeared in the October 2010 issue of INTERNET TELEPHONY

Nymgo (News - Alert), pronounced nim-go, has an interesting voice business model. It’s a SIP-enabled international voice termination provider that offers SIP interconnect to business gateways as well as to individual end users on fixed as well as mobile devices. Access to wholesale international voice rates from a mobile phone is a model that many have sought, but Nymgo seems to have found the way to make it work – profitably.

Since the service is a SIP-based interconnect the company can and does target the users of Skype (News - Alert), Fring, Nimbuzz and other P2P VoIP operators. The best part for Nymgo is that every one of its customers is a paying customer. It does not offer a free peered VoIP service. So, basically, the company can cherry pick the savvy users that make international calls and take the SkypeOut business away from Skype and the similar offerings from the other P2P providers.

A Nymgo representative notes that a call to India with Nymgo is $0.013 per minute compared to $0.092 with Skype, which adds up to significant savings when making a lot of calls. The rep says that according to Skype’s IPO filing, that company counts about eight million paying users. By comparison, since late 2008, Nymgo has amassed nearly 2 million users – almost a quarter of Skype’s comparable users – in a short amount of time.

The P2P VoIP peering providers have always had the challenge of success issue, which is, if everything is on-net and free peered, then what happens to their off-net termination business that generates revenue? The Nymgo service adds a new wrinkle to this, but it also faces the same challenge. The new wrinkle is that the company is attacking the P2P VoIP peering providers off-net termination revenue with its own lower cost offering, thus taking the business away from competitors. At the same time, as more people free peer with each other, the need for off-net decreases.

So, as I recently asked Omar Onsi, founder and CEO of Nymgo, how does the company survive if its revenue comes from the off-net termination?

"This is the big question." Onsi says.

Doesn't P2P kill long-term revenue from billed minutes?

"Yes, generally,” Onsi replies. “Maybe they'll make money from ads. I think this is far down the road though, but definitely in the far future I think this is what will happen. For now it is all a volumes game given the rate to terminate."

So, how does Nymgo differentiate itself in this market right now?

Onsi says that: "Since 2008, Nymgo has had 2 million downloads and all customers are paying. Last year 400 billion minutes were terminated all around the world. Nygmo goes after all international minutes and not just one group. We target ex-pat communities, travelers and others. End users are the biggest user group for us."

Clearly there is a market for telephone calls (full-duplex, audio SIP sessions to be specific in this context), and there is still revenue associated with it. What is amazing is how small the margins have become and how they can be meaningful with volume, but only to a small organization. The larger the company the more willing and motivated it becomes to just throw voice in with a bundle. The flat-rate voice offering becomes more meaningful as it represents a fixed revenue line item for the service provider in what amounts to an access charge for transport. In the SIP-enabled VoIP termination business this line item is not possible since that function is already being billed for by the ISP. That then only leaves the revenue from terminating minutes.

What happens if/when all of the major telecom and cable companies in the world peer? Then they can interconnect their private SIP clouds and the entire concept of international long distance will be gone to some extent, at least for the majority of the population living in the broadband-connected regions of the countries in the world with SIP VoIP operators. There will always be a need for off-net voice termination for places like the Scott Base in Antarctica, but it will become less and less.

The question is: How long will billed minutes last? It depends on the penetration rate and availability of true multi-lateral peered endpoints. When the day comes that the vast majority of people and machines are peered and there is no longer an off-net VoIP endpoint to bill for call termination maybe someone will ask, "Where did the Nymgo?"

Until then, the low-margin, high-volume calling race continues.

Go Nymgo Go!