April 2004

In the CEO Spotlight section in Internet Telephony� magazine, we recognize the outstanding work performed by exemplary companies. Each month we bring you the opinions of the heads of companies leading the Internet telephony industry now and helping to shape the future of the industry. This month, we spoke with Tom Evslin, Chairman and Chief Executive Officer of ITXC Corp.

IT: What is your vision for ITXC and how is the company positioned in the next-generation telecom market?

TE: ITXC is currently the market segment leader in international VoIP traffic. In the final quarter of 2003, we carried over 1.2 billion minutes of traffic. Most of this traffic was between ordinary PSTN phones. The callers had no idea that the �middle� of their calls were actually carried on the Internet.

Up until the end of 2003, VoIP growth was invisible at the retail level. But, in fact, by that time more than 10 percent of international calls were already being carried on VoIP networks because of the growth in the use of VoIP by wholesalers and new entrants in deregulating markets. This VoIP traffic funded the buildout of ITXC.net, our Internet-based VoIP network of connections between the Internet and the PSTN. We have direct connections to more than 175 countries and can reach any phone in the world, PSTN or IP. Our revenue for 2003 was over $338 million.

VoIP is now becoming visible at the retail level as well. In 2003, more ports of IP PBX capacity were purchased than of traditional TDM PBX. Services offered by Vonage, Net2Phone, Delta3, Skype, and Softbank among others have drawn attention to premises VoIP in the residential market. All major carriers now are either getting ready to offer premises VoIP services or using VoIP within their own networks or both.

So we believe the telecom market of the future is a VoIP market. ITXC is perfectly positioned to serve this VoIP market because we have the largest international VoIP network and because we�ve developed proprietary and patented technology which solves the problems, which can slow the deployment of VoIP.

We also believe that the telecom market of the future will be largely a horizontal market. Instead of the old vertical monopolies of last generation�s telephony, we are seeing a dynamic separate retail layer of marketing companies that don�t own network or own only local access networks. These retailers and the increasingly independent retail arms of the old vertical carriers need to buy products like call completion, signaling, and IP interconnection. ITXC is and always has been a pure wholesaler concentrating on meeting the need of our customers who sell to the retail and business market rather than competing with them.

Simply put, our expertise in VoIP, our VoIP technology, and our huge existing network have been the engines of our growth. After our merger with Teleglobe we will have not only much greater voice scale but also IP transit and connectivity and signaling services to sell as well. We will deliver these services to the retailers who reach businesses and consumers.

IT: Describe some of the key decisions that you have made as CEO to steer your company through the recent challenging financial straits.

TE: Although telecom has been rough sailing for everyone, ITXC did not have the ballast of enormous debt, which sunk so many of our competitors. We built our network on the Internet so we didn�t need to borrow billions of dollars for physical construction or purchase of circuits. Being debt-free, we are able to ride out the storms and grow as we work towards positive cash flow.

We bet the company on the success of VoIP and specifically on our ability to deliver high quality while getting the economic advantage of using the Internet. We had to develop much of the technology ourselves to make this happen but that patented technology has now become an important asset.

We stayed wholesale both so we could grow our network at the maximum rate and to avoid competing with our customers who sell to the retail market.

And, we decided to sign a definitive agreement to merge with Teleglobe. This agreement is subject to regulatory approval as well as approval by ITXC stockholders. Once it is approved, and we are confident it will be, we will get the advantage of three times as much traffic, a wealth of bilateral relationships Teleglobe has with traditional carriers around the world, a huge IP network that cost billions to build but was purchased out of bankruptcy at a low price, stronger cash flow, and more services such as signaling for the wireless market and IP transit and connectivity to sell to our wholesale customers.

IT: To what do you attribute the recent IP telephony market upswing?

TE: VoIP has actually been growing rapidly but invisibly over the last six years. It has now not only reached critical mass within the networks of carriers but is rapidly being deployed much more visibly on business and residential premises where it is much more visible. The market overreacted to hype several years ago and reality caught up. Then the market was too discouraged but reality is now exceeding the market�s diminished expectations and there is new excitement.

IT: What makes ITXC�s services unique and how can a client benefit from using them?

TE: ITXC had developed proprietary technology, which allows us to deliver carrier grade quality (including premium quality where a customer needs it) even though we get the economic advantage of using the Internet for transport. Other technology we�ve developed allows us to change routing hourly network-wide, something that would be impossible on a traditional network with intermediate switches, in order to get the �right� blend of price and quality consistently. This means that our carrier customers get the best value in international call completion by using ITXC.

Our ITXC VoIPLink Service, which has recently become generally available, makes VoIP internetworking practical. This is increasingly important to carriers who either have premises VoIP customers or their own internal VoIP networks. When these carriers can connect their VoIP networks directly to ITXC.net, they save enormous amounts of capital and operating costs compared to a legacy PSTN connection. ITXC VoIPLink Service solves sticky problems of interoperability and also provide a carrier-class demarc between our customers� network and ours.

Carriers also benefit by terminating local traffic for ITXC. We can deploy faster than anyone in the industry � especially with a VoIPLink interconnect � and deliver massive amounts of traffic and revenue to most destinations sooner than anyone else.

IT: What do you make of the increased buzz surrounding IP telephony regulation? What are some of your thoughts surrounding this increasingly important issue facing our industry?

TE: The increased pressure for regulation is a direct consequence of the increased success of VoIP. It makes no sense to apply outdated regulations developed to restrain monopolies to the very competitive world of VoIP. There are no VoIP monopolies nor any sign that there will be. In fact, since VoIP carriers don�t need to own networks, VoIP has proven to be the technology of choice to compete with former monopolies. It would be ironic if the regulations originally passed to control monopolies were now used to protect them.

Applying obsolete regulations to VoIP will not kill the industry; the benefits to our customers are too great. But overregulation will slow the benefits available to consumers and businesses and will hurt the economy of any country which adopts them. This is the converse of what happened as one country after another enhanced its competitive position by deregulating and demonopolizing.

VoIP service and infrastructure providers need to voluntarily meet legitimate needs of law enforcement, 911, and a disabled and rural access. Providers also need to be active in organizations like the Voice on the Net Coalition to make sure their voices are heard where regulation threatens.

IT: Describe your view of the future of the IP Telephony industry?

TE: Voice over IP is the future of telephony. That means there won�t be a separate industry for long. By 2010, at the latest, all voice will be on the Internet and voice and other data services will be well-integrated with enormous public benefit.

[ Return To The April 2004 Table Of Contents ]