voiceglo, an IP telephony company with an
interesting past and a more interesting product (and a name written in lower
case letters), wants to be your partner. And according to voiceglo president
Edward Cespedes, a fair number of ISPs already want to be his partner too.
voiceglo, which came out of the chutes earlier this year with both a Vonage-like,
hardware-based home and business phone line replacement product and an
intriguing go-anywhere browser-based phone service, sees distribution and
marketing as the only barriers to certain successand even they’re not really
that big a barrier.
“The product is so scalable and the margins are so high that all we have to
do is make the distribution deals,” Cespedes says. “We’ve got hundreds of ISPs
interested.”
voiceglo has already made one intriguing distribution deal with FTSWireless,
a Florida company building out a chain of retail stores in which it plans to
sell voiceglo’s products, plus hotspot and other Wi-Fi services to supplement
its main business of selling mobile telephony products.
voiceglo sees all kinds of potential distribution partners. Cespedes suggests
Walmart and American Express as possiblesthough he is careful to make no claims
of being anywhere near signing deals with either.
“I could walk into Walmart tomorrow, and with no capital expenditure and 40
percent margins they could start [selling the voiceglo products] the day after
tomorrow,” he says. “Anybody with a major customer base now can be in the phone
businessbecause the Internet has removed the risk.”
Anybody could be in the IP telephony biz, but apparently ISPs are voiceglo’s
main focus.
“There are a number of top-tier ISPs we’re talking to,” Cespedes says. “But
the great bulk would be next tier companies. We’ve been pleasantly surprised at
how hungry ISPs are for IP telephony.”
He’s expecting to announce “a number” of ISP distribution deals in the next
60 days.
For ISPs, of course, this may sound like dij` vu all over again. A few years
ago, voice over IP (VoIP) equipment vendors and service providers tried to
convince them that they could improve their ARPU (Average Revenue Per User) by
offering VoIP services.
They could either resell service from an IP telephony specialist or provide
their own using off-the-shelf VoIP infrastructure equipment. It sounded like a
reasonable proposition, but few ISPs ended up doing it.
The reason: the service either wasn’t very good, or it cost too much to
provide. That was then, this is now. Cespedes is making all the same arguments,
but they may make a little more sense now.
The spread of broadband access to homes and small businesses, the glut of
cheap fiber for Internet backbone and managed IP networks, along with a drop in
the price of VoIP infrastructure and customer premises equipment (CPE) have
changed the quality and economics of VoIP.
Witness the success of companies such as Vonage, Net2Phone, and 8×8.
I’ve personally tried three different IP telephony services and they all
delivered good enough voice quality and reliability to give even small business
customers reason to consider them seriously.
Cespedes is probably overstating the case when he says of IP, “This is just a
better way to do voice.” But he really doesn’t mean from the end customer’s
perspective, he means from the start-up service provider’s perspective. In fact,
he admits it won’t be perfect at first.
“For the first few years of all this, of course we’re going to experience
occasional problems,” Cespedes says. “You might have a bad connection one day,
or the voice quality might be a little less than it should be another day. But
think back to when you got your first cell phone.”
True enough. The IP phone services I’ve tried are often better than even
today’s cell phone services.
It’s the low cost of entry for service providers that makes IP so attractive.
Cespedes compares his company’s situation to that of Bell South, the incumbent
telco in Florida where his company is headquartered.
“I have 40 employees, no debt and I can deliver phone service globally,” he
points out. “Bell south has 100,000 employees, 44 million customers it charges
$54 monthly and has $11 billion in debt. It can’t drop its prices without going
bankrupt.”
“I’m not sitting here and telling you I’m the giant killer, but this is a
trillion-dollar-a-year market. The problem in the past was that to get into it
you had to spend $50 million. You don’t anymore.”
What does voiceglo bring to the table that Vonage and other better
established IP telephony players haven’t already? A willingnesseven
eagernessto work with ISPs as distribution partners may be the most important.
voiceglo does also have some patentable technology, the Glophone
browser-based soft phone. Cespedes admits, however, that the hardware-based
phone line replacement service which isn’t hugely different from Vonage’s, is
the product most prospective partners are interested in for now.
For those still unfamiliar with the technology, here’s how it works.
The service provider, in this case voiceglo, supplies the end customer with
an IP telephony gateway, a low-cost hardware device into which the customer
plugs his high-speed Internet access serviceand a regular telephone.
A pass-through port carries the Internet signal to the customer’s computer or
computers.
Once set up, the system delivers dial tone to the phone and lets the customer
make calls to any PSTN phone exactly the same
way he would on a telco-supplied phone.
The gateway device digitizes the analog signal from the phone’s microphone,
converts it to IP packets and sends it out over the last mile link to the ISP’s
nearest POP.
The ISP’s backbone network carries the signal to the VoIP service provider’s
nearest POP. From there, it travels over the service provider’s backbone to a
POP closer to the final destination.
And there, the VoIP provider switches it through another voice gateway, which
reverses the analog-digital process, and sends the call out over the PSTN.
This is such an economical way to carry voice that service providers like
voiceglo can afford to significantly undercut telco prices.
voiceglo charges $50 a month for unlimited local and long distance calling to
the U.S. and Canadaincluding voice mail and other calling line services. And
customers can get numbers from area codes from places other their own area. My
voiceglo number is a coveted 212 (Manhattan) area codeand I’m in Canada.
While companies like Vonage have multiple POPs, which reduces the distance
and number of router hops that calls have to travel over the often congested
public Internet, voiceglo so far has only two: one in Miami and one in New York.
It is about to add a third in Los Angeles.
Cespedes claims his company’s compression technology is so good that the
longer distance over the public Internet is not a problem. Calls only require
about 14 Kbps of bandwidth, so even a good 28 Kbps connection can theoretically
carry them.
The two voiceglo POPs, meanwhile, provide redundancy. They’re set up with an
automatic fail-over mechanism so that if one goes down, traffic will be diverted
through the other.
According to Cespedes, the important difference between Vonage and voiceglo
is in the cost structures of the two companies. He claims it costs Vonage $300
to $350 to acquire each customer. His costs, because he intends to work through
distribution almost exclusively, will be much lower.
voiceglo also has the Glophone technology and service, which Cespedes claims
is unique. “What nobody else can do that we’re doing [with Glophone] is mapping
a phone number to a dynamic IP address,” he says.
It means users can log on to their Glophone account from any audio-equipped
computer with a good Internet connection and make and receive telephone calls
using their voiceglo-supplied U.S. telephone number. Anywhere.
“You don’t need your own laptop with you and you don’t need to download
anything new onto the computer you’re using,” Cespedes says.
For the cost of shipping, voiceglo will send customers an earbud-style phone
they can carry with them and plug in to computers wherever they go. Or they can
buy a headset phone that plugs into a USB port.
USB phones are readily available from retailers, or voiceglo will sell
subscribers a unit that has been “tweaked” to work with Glophone.
voiceglo vice president of strategy and business development Chris Petrovic
says subscribers should be able to go into an Internet cafi, plug an earbud or
headset phone into one of the computers there and make and take calls.
Will cyber cafi owners permit this? Many won’t even notice if customers are
doing it, Petrovic suggests. Also, many are already letting customers plug in
headsets to listen to music.
“It makes sense from a business perspective [for the cyber cafis to let
customers do this] because it means they’ll likely stay on [the computer]
longer,” Petrovic says. “Whether all the Mom-and-Pop shops will get it right
away is another thing.”
Cespedes says the Glophone is actually what the company is most excited about
because of the portability and because of the call and voice quality it offers
even without a gateway device.
I tried the Glophone service using a USB phone from Plantronics,
a well-respected vendor of PC and PSTN phones.
I was impressed on a call to voiceglo’s offices. The voice at the other end
did sound somewhat hollow and “tin-canny.” However, there was no latencydelay
of the voice, or break up.
And Brian Fowler, voiceglo chief technology officer (CTO) and the Glophone
technology’s developer, says, it’s possible to improve voice quality by tweaking
the Windows software.
Later calls to other numbers with Glophone were less impressive, though still
surprisingly goodprobably still good enough even for business users interested
in avoiding overseas long distance tolls and/or cellular air time and roaming
charges.
On poor IP connections, when the two parties talk over each other, the voice
from the other end is often unintelligible. In the case of one test call using
Glophone, the other voice was entirely inaudible when I was speaking. This can
make for frustratingly awkward conversations, but that may be offset by the
cheapness of the call.
FTSWireless chairman and CEO Scott Gallagher is sold on Glophone. His company
used the technology for three months before deciding to sell the products in its
stores (and also through its direct sales reps).
Gallagher uses Glophone when he travels from his headquarters near
Philadelphia to visit the Florida stores. The stores are Wi-Fi hotspots, so he
connects wirelessly from his laptop to make calls and believes customers will do
the same.
FTS is also installing voiceglo’s gateway-based service as the only phone
system in one of its stores. If customers know FTS is using it, they will be
less hesitant about making the leap themselves, he reasons.
“Since our target demographic in the retail stores is younger people who are
very technologically savvy and who are interested in utilizing all these new
technologies, we think there’s a significant opportunity to sell them VoIP
phones,” Gallagher says.
He adds, “We’ll have to see how the market develops. It’s a radical
technology, but it’s something we think has a radical upside.”
What kind of partner would voiceglo make?
The talk of 40 percent margins is tantalizing. Cespedes says every deal will
be different, depending on what and how much the ISP wants voiceglo to
domarket, bill, provide front-line support, etc.
While it’s a relatively unheralded company, voiceglo’s parent, TheGlobe.com,
may sound more familiar. In the late 1990s, TheGlobe, started by two young
dot-com hotshots to operate a portal sites, became famous when its initial
public offering (IPO) broke all records for money raised. The company’s stock
price multiplied 60 times in one day.
TheGlobe went on to grow annual revenues very quickly to about $50 million at
their peak. But then came the dot-com bust and TheGlobe went bustthough it
never went into debt. “The two founders were as vilified on the way down as they
were celebrated on the way up,” Cespedes notes.
He and his partner, who have started several businessesincluding Alamo Rent
A Car, which they sold for $650 millionhad invested in TheGlobe in the
beginning. In 2002, after the company’s stock price plummeted to a penny, they
took it over.
Their idea was to acquire small but profitable Internet-related companies,
attracted by TheGlobe’s status as a public company, and Cespedes’ and his
partner’s business acumen. They would grow the companies and sell them off.
Fowler’s was the first business plan they saw.
“When we saw the potential of this, when we considered that [telephony] is
such a big marketalmost a trillion dollars a yearwe said, ‘Forget the original
plan, let’s devote all our resources to building this business.'”
Cespedes and his partners put in more of their own money and raised an
additional $30 million on the stock market “which may as well have been a
billion since it’s so hard to raise money right now,” he says. The stock has now
gone from a penny to a dollar.
None of this proves voiceglo can make a success in the emerging and hotly
competitive IP telephony market, of course. At the very least, though, it’s an
interesting company with an interesting productand one that ISPs would do well
to investigate further.
Reprinted from ISP-Planet.
