June 2000

Free Long-Distance: Here To Stay? 
Of Course It Is -- It's Child's Play!

BY RICH TEHRANI

Since you are reading a publication titled Internet Telephony, you may have made the connection that the next logical medium for free service is long-distance calling, and in fact, the premiere issue of this magazine printed back in February of 1998 had the words "Free Speech" on its cover.

FROM PC TO PHONE, A FREE CALLING MODEL'S SEEDS ARE SOWN
You may ask (and rightly so) why I am making a big deal about free long-distance if we had a cover titled "Free Speech" over two years ago? Beyond that, we have been discussing various forms of free long-distance for years. The answer is that this time it's different. In the past, you would need NetMeeting or a similar software package on each end of a PC-to-PC conversation to have a free Internet or IP telephony call. You could have even used an Internet telephony appliance from a company like Aplio. Now it's become much easier. For the first time ever, you can make free PC-to-phone calls. What this means is that the person on the other end of the line just picks up an analog telephone and nothing more. Their phone rings normally and they may not even know you are calling over the Net.

Do you know how such service would be supported? Just think about it, if long-distance is free from any computer and there are hundreds of millions of PCs on the market, some poor Internet telephony service provider has to terminate a lot of long-distance calls. Who's going to pick up the tab? How is this business model supported? Well if you've followed me so far, you probably guessed that advertising would again support free long-distance. It is a logical conclusion -- to me -- that soon, all long-distance will be free or at least incredibly inexpensive due to advertising support. In fact, I think it's so obvious that even a child can see that this is the next wave. (Hence the nursery rhymes scattered throughout this month's column, and on the cover.)

You likely read this magazine to learn about the future of technology, so in addition to my views I decided I would treat you to the viewpoint of one of the world's leading Internet telephony service providers (ITSPs), Net2Phone. I asked Sarah Hofstetter, vice president, corporate communications, some questions about the future of free PC-to-phone, advertiser-supported long-distance.

RT: It would seem that the success of companies like dialpad.com proves that the free product/service model supported by advertising has come to the long-distance market through the use of Internet telephony. Does this mean that we will all enjoy free long-distance calls from this moment on?

SH: Smaller companies who are offering free telephony are limiting this to a domestic marketplace. Net2Phone is a worldwide company that is carefully examining the ramifications of offering free telephony. This is certainly an exciting phenomenon and we are rapidly building our wholly owned IP network to support even more customers than we have today.

RT: Do you feel a free long-distance model that is supported by advertising and perhaps paid enhanced services will generate more or less revenue for service providers? Will service providers of the future remain profitable?

SH: The phenomenon of offering free telephony is still new and revenues from these companies offering free telephony are either slim or non-existent. As a revenue-driven company with gross margins of over 40 percent, we plan on offering similar solutions with enhanced (paid and free) services, but only once the advertising can fully support the revenue. Additionally, from a capacity point of view, as a leader in Internet telephony services with millions of current customers and a worldwide brand name with top investors like AT&T, AOL, and Yahoo, we have to be prepared for a worldwide onslaught of customers should we move to a free model.

RT: Should service providers let their customers know that calls are traveling over IP networks (whether public or private networks)?

SH: Provided that the service is toll quality (like Net2Phone's), there is no need to let the customer know whether or not the call is routed over IP. The quality should be so good that it is irrelevant.

RT: Why should customers currently use IP networks when PSTN long-distance is available for just pennies per minute?

SH: Firstly, convenience. For customers that have only one telephone line at home, customers can use the same line for both data and voice. Secondly, enhanced features. Customers can get more for their money by using IP-based services such as unified messaging, conference calling, call forwarding, etc.

RT: Do you forecast a day when all long-distance calls will be free? If so, will this be a U.S. or worldwide phenomenon? Would it apply to the wireless market?

SH: This is certainly a trend that we expect to continue for the next few years in the U.S., but internationally, there are some geographies that will not allow it. Net2Phone has a worldwide sensitivity as more than half of our customers are outside the U.S.

RT: Is free long-distance going to generate interest in enhanced (i.e., paid) services (caller ID, voice mail, etc.)?

SH: At least for the first two years. End users are accustomed to paying a phone bill along with other utilities, and they won't mind shelling out a few extra dollars for enhanced services provided they don't have to pay for long-distance.

CONCLUSION
I'm really excited about the prospect of free long-distance service and look forward to testing many of the new free or reduced rate services. I have already tested and written about dialpad.com last month and I'm looking forward to doing the same with new entrants in the future. If you're experimenting with alternative long-distance providers and think you have a story worth sharing, please drop me a line at rtehrani@tmcnet.com.

Imagine sunning yourself on the white sand beaches of beautiful Coronado Island in southern California. Envision your feet -- frolicking through the pounding turquoise surf, mere steps away from the historic Hotel del Coronado where superior service and accommodations await you. And what's that you hear? Why, it's the sound of Voice over IP, coming from the technology sector's hottest and most pioneering vendors, eager to demonstrate and explain their products to you in detail.

You'll find all this and more at the second annual INTERNET TELEPHONY EXPO, October 4-6 at the Hotel del Coronado, just minutes away from San Diego. This rapidly growing show offers an Exhibit Hall filled with solutions. And if interoperability is what you're seeking, be sure to check out ConvergeNET, TMC's much emulated but never duplicated proving ground for standards. Participants work with each other to ensure their products interoperate, leading to technology breakthroughs and greater awareness and understanding of the Internet telephony space.

For an even more in-depth explanation of this exciting technology and the latest developments, check out one of the many informative conference tracks that will be featured at the show. The Corporate/Enterprise track will deal with cutting-edge topics like LAN-based telephony, enterprise Internet telephony gateways, telecommuting, and voice over DSL. Other topics will include voice-enabled e-commerce, IP-PBXs, VPNs, unified messaging, and audio/video conferencing and collaborative computing.

Or maybe you're more interested in our Service Providers, ISPs, Carriers and Telcos track. Several exciting sessions will deal with topics like the evolution of next-gen networks, Internet telephony opportunities for service providers, ASP opportunities, powerlines for VoIP networking, and cable telephony. Additional sessions will focus on the role of the gatekeeper in a next-generation network, SS7 for IP telephony, billing options for next-gen telcos, and broadband wireless.

The best news yet is if you sign up today for Internet Telephony EXPO, you can save the late and on-site registration fees, and avoid the lines. Coronado is one of the most beautiful and sought after resort locations in the country, and while there you can enjoy surfing, sailing, biking, and shopping. And the Hotel del Coronado is equally inviting, boasting past guests like Ronald Reagan, Frank Sinatra, Marilyn Monroe, and Charles Lindbergh. All this and the hottest VoIP event in the country. What are you waiting for? Sign up today!