Net2Phone Forms New IP Network Company

With the help of network superpower Cisco
Systems Inc.
, Net2Phone Inc.
Monday formed a new company to develop and market network management
software for Internet telephony.

Cisco, who will lend its hardware to Net2Phone new
venture, purchased a minority interest in Adir Technologies Inc., which was created
to offer Net2Phone’s VoIP software to all types of service providers

Cisco will also jointly market Adir’s network management platform to its own
VoIP customers, which will yield Net2Phone
a substantial new source of revenue from software
licensing fees.

Adir offers real-time advanced call management, rating, routing, and
authentication — features that are essential for managing circuit-switched
networks but have been missing in Voice-over-IP networks until now.

The platform is actually not a thrill-of-the-moment play. It’s base
technology was originally created in Net2Phone’s research and development
laboratory in 1995 when the company rolled out the first service to bridge
voice communications with a PC using the Internet, and has been continually
enhanced since then.

Simply, Net2Phone enables people to place clear, low-cost calls from their
computer, telephone, or fax machine to telephones or fax machines.

“While most telecom and Voice over IP equipment has been designed for heavy
call processing, the software intelligence behind it has been lacking,” said
Howie Balter, chief executive officer of Net2Phone. “Through the formation
of Adir, we hope to enable service providers with the ‘brains behind the
equipment,’ allowing them to realize the full value of their networks.”

Alistair Woodman, director of marketing at Cisco’s voice and video services
business unit, said via conference call Monday that the deal is a wonderful
opportunity to set up a product company for Cisco’s clients and that,
although his firm had looked at other technologies in the telephony field,
Net2Phone’s service would lead to “faster roads to market.”

“We now may provide best-of-breed solutions to marketplace and give our
customers access to these products,” Woodman said. “We’re at the dawning of
building large packet telephone networks so it is a very timely moment to

Aurica Yen, Yankee Group analyst of consumer market convergence planning services, told Monday that any business spinoff is risky, but that one of the things that makes Net2Phone’s foray different, is that it is placing an emphasis on coming up with network management solutions and multimedia plays as opposed to just plain voice calling.

Noting that Cisco was certainly a force in VoIP products, Yen said Net2Phone was “taking advantage of their brand their name putting themself in a high-profile position,” particularly over smaller rivals such as deltathree and DialPad Inc.

“It should be really interesting,” Yen said. “There are problems and obstacles with the quality of service for VoIP. “It’s not near the quality of traditional circuit-based calling.”

Yen also noted that AT&T Corp.’s, $1.4 billion, one-third stake in Net2Phone last
March gives the firm powerful shoulders to lean on. AT&T hopes to be Net2Phone’s first management software client. The giant
has its own high-performance network in the works to provide VoIP services.

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