IP Business News - Blogs

Vonage: Better Quarter

Gary Kim — Thu, 08 May 2008 08:13:53 -0700

Vonage's financial performance in its most-recent quarter was better than it has seen in some time. Revenue was up 15 percent year over year and up four percent sequentially. The company reported positive operating income compared to a double-digit loss in the same quarter last year. Average revenue per user was up, both year over year and sequentially.

One might still question how well Vonage will do compared to cable VoIP customers, but the market is growing. According to Harris Interactive, VoIP use has increased to 15 percent of U.S. users.

Vonage also inked a deal with Covad allowing Vonage to offer a dual-play offer including 3 Mbps or 6 Mbps digital subscriber line service in addition to voice. It isn't immediately clear how many potential customers will want to use Covad's "voice optimized" access, but that will improve user perception of voice quality.

Vonage Holdings Corp. recorded revenue in its first quarter 2008 up 15 percent from $196 million in the first quarter 2007 and up four percent sequentially, driven by an increase in subscriber lines and higher average revenue per user. Vonage also reported a GAAP net loss of $9 million, down from a loss of $72 million in the first quarter 2007.

Adjusted operating income was $8 million in the quarter, a significant improvement from an adjusted operating loss of $58 million in the year-ago quarter.

Average monthly revenue per line in the first quarter 2008 was $28.85, up from $28.31 in the year-ago quarter and $28.19 reported in the fourth quarter 2007. Average monthly telephony services revenue per line for the quarter increased to $27.87, up from $27.36 reported a year ago and up from $27.42 sequentially.

On a per line basis, average direct cost of telephony services was $7.26, down from $8.03 in the year ago quarter and up from $7.11 sequentially.

Direct cost of goods sold was $22 million, up from $13 million in the year-ago quarter and $17 million in the prior quarter as the Company utilized a large portion of its remaining inventory of higher cost CPE devices. Direct marginn remained flat year-over-year at 65 percent.

Selling, general and administrative expense was $79 million, down from $91 million in the year-ago quarter, and flat sequentially.

Marketing expense for the quarter was $61 million, or 27 percent of revenue, down sharply from $91 million, or 46 percent of revenue, a year ago, and down from $63 million, or 29 percent of revenue, sequentially.

Marketing cost per gross subscriber line addition was $216 in the first quarter 2008, down from $273 in the year-ago quarter and $223 sequentially.

The company expects SLAC to increase in the second quarter, consistent with prior year seasonal trends. Vonage expects to gradually increase marketing expenditures in the second half of 2008 to accelerate growth but continues to expect the cost of acquisition to fall within $225-$250 for the full year 2008.

Vonage added 30,000 net subscriber lines in the first quarter 2008 and finished the quarter with more than 2.6 million lines in service.

Vonage also announced a relationship with Covad whereby Vonage will offer a DSL service to both residential and small business customers. The Company expects this new service, called Vonage Broadband, to be available to customers by the end of the year.

Average monthly customer churn increased to 3.3 percent in the first quarter 2008 from three percent in the fourth quarter 2007. The company says it believes it has improved customer service enough that lower churn will result, in the second quarter.

Cbeyond Illustrates Channel Trends

Gary Kim — Thu, 08 May 2008 08:12:42 -0700

Cbeyond's experience selling Microsoft applications and BlackBerry wireless services illustrates a trend in sales of telecom-related products. As it turns out, increased product complexity, and a broader range of new products, is leading to disproportionate sales results. To be specific, most of Cbeyond's application and wireless sales are made either by its direct sales force or by more-technical solution providers, rather than by Cbeyond's other channel partners.

That matches with what most service providers report: that IP services require more technical knowledge, and possibly more technology capabilities, than has been the case in the past. That portends changes in channel partners. Namely, more reliance on value-added resellers and value-added distributors, consultants and system integrators; less reliance on other partners.

Cbeyond Churn Issues: Why?

Gary Kim — Thu, 08 May 2008 07:07:35 -0700

Cbeyond had to disconnect about 300 customers in the fourth quarter of 2007 for nonpayment, pushing its churn rate above historic levels. Cbeyond says it also disconnected about 300 customers, for nonpayment, in the first quarter of 2008. Company executives call this "uncontrollable" churn.

To be sure, Cbeyond has such low churn, normally about one percent, that a 0.3 percent increase in churn presents a 30-percent uptick in the rate.

Some observers have looked at the increase in churn rate and concluded that Cbeyond now is experiencing a different problem, namely an increase in customers coming to the end of their contract periods and not renewing.

That would be a much more dangerous trend, to be sure. But Cbeyond says that is not the case, and insists its two-quarter churn problem is strictly caused by non-paying customers. It is conceivable that is due to credit checks that should have been more stringent or the slowing economy.

Customer additions in the first quarter were, in fact, more uneven than Cbeyond is used to seeing, so economic sluggishness seems a likely contributor.

Cbeyond executives say they expect a return to more-normal metrics in the second quarter of 2008, on both the churn and customer acquisition fronts. Churn is trending lower in the second quarter and a return to more historical levels over the next couple of quarters is expected, the company says.

iProvo Overbuilder Network sold to Broadweave Networks

Gary Kim — Wed, 07 May 2008 17:07:54 -0700

Provo, Utah's citywide fiberoptic network has been sold to Broadweave Networks, a local company that hopes to make a business out of triple-play services where Provo had not been able to do so. The network, called iProvo, was the largest municipally-owned fiber-to-the-premises network in the United States, reaching all 36,000 residences and businesses within the city.

Up to this point, Broadweave has served the Traverse Mountain planned community of 8,000 homes and 4.5 million square feet of office and retail space across 3,000 acres in Utah's technology belt. So the acquisition gives Broadweave about four times more homes passed than it currently has access to.

Broadweave will purchase the fiberoptic network for $40.6 million, which is enough to retire outstanding bonds incurred by Provo to build the system.

Under the terms of the deal, which is subject to municipal council approval, the city retains a license to use the network to connect city buildings, schools, and power infrastructure. Broadweave will operate as a retail provider, rather than as a wholesale provider of transport to third parties and says it will put more emphasis on services aimed at business customers.

One might draw several conclusions from iProvo's experience so far. Some will argue that overbuilders are going to have a tough time competing against both cable and telephone companies offering triple play services.

Others will say the sale shows municipalities really should not be running communication networks. Some will point to other fiber access networks in the Salt Lake City and Provo regions and argue that neither wholesale nor retail strategies have worked well.

The issue is what Broadweave's new management thinks it really can do to improve financial performance. One of the salient features of most networks serving entire communities is that there is an 80/20 rule for revenue. A small number of neighborhoods actually produce most of the revenue.

In fact, some studies suggest that as few as five to seven percent of neighborhoods of 500 homes or so produce half the revenue created by an entire citywide network. And the same sort of thing is true for business revenue as well. So it might not be so easy to boost revenues.

Broadweave will gain some scale benefits, though the difference between 8,000 and 44,000 might not be as large as you might think. Programming contracts won't be noticeably affected. There might still be a need for two headends. Installers can only do so many jobs a day. Some marketing and other overhead can be spread over a wider base of customers, of course.

Still, operating cost savings are unlikely to change the financial picture all that much. Only significant new sales volume is going to change the current iProvo financial model.

What Google, Cable Ops Get from Clearwire Deal

Gary Kim — Wed, 07 May 2008 10:40:21 -0700

Google and several cable operators got some goodies in addition to equity in the new Clearwire national WiMAX network. And the advantages do not come from WiMAX, but from the Sprint 3G network.

Briefly, Google apps (YouTube, Google Maps, Gmail) get premiere placement on some Sprint devices, while Google Web, local search and location information become the default options for Sprint data customers.

The cable operators become resellers of Sprint 3G services, including voice. So now the three operators will be able to construct quadruple play services. That is the more important development, as interesting as the Clearwire resale agreement is. In the near term, cable operators need a viable mobile voice option more than they need a future mobile broadband option.

To be sure, Google and the new cable investors will become resellers of the WiMAX network as well.

Google will partner with the new Clearwire in the development of Internet services, advertising services and applications for mobile WiMAX devices. In addition, Google will be the search provider and a preferred provider of other applications for the new Clearwire’s retail product. As an open network, anybody can "partner" with Clearwire to develop applications or supply devices. But Google is a "preferred" and "default" provider, which historically has real value in the mobile arena.

The new Clearwire will support Google’s Android operating system software in its future voice and data devices that it provides to its retail customers.

But Sprint and Google have also entered into an agreement whereby Google will become the default provider of web and local search services, both of which will be enabled with location information, for Sprint, as well.

Sprint will also preload several Google services, including Google Maps for mobile, Gmail and YouTube, on select mobile phones and provide easier access to other Google services.

Comcast, Time Warner Cable, and Bright House Networks will be resellers of Clearwire’s mobile WiMAX service. More important, over the near term, all three cable operators now will become wholesale retailers of all Sprint 3G services, including voice services.

Clearwire is getting the attention. But Sprint 3G will be where the action is.

Multiple New Europe-India Cables: Price War Coming

Gary Kim — Wed, 07 May 2008 07:39:37 -0700

A consortium of 16 telecommunications companies will construct the Europe-India Gateway cable system, a submarine cable that will span 15,000 km from the U.K. to India. EIG is projected to be completed in Q2 2010 at a cost of USD700 million, and will have maximum potential capacity of 3.84Tbps.

The EIG cable joins a long list of planned new undersea cable projects that will connect Europe, the Middle East and India and will be the fifth new cable due to enter service between Europe and Egypt in the 18-month period from the first quarter of 2009 and the second quarter of 2010, say analysts at TeleGeography.

Damage to two cables on this route, SMW-4 and FLAG Europe-Asia, caused significant disruptions to communications between Europe, the Middle East, and Asia earlier this year. The addition of these new cables will provide extra capacity and multiple options for routing traffic, improving the resiliency of networks in the region. The five new cables will combine to add 26.24Tbps of potential capacity.

The 16 telecoms companies investing in the project are: AT&T, Bharti Airtel, British Telecom, Cable & Wireless, Djibouti Telecom, Du, Gibtelecom, IAM, Libyan Post, Telecom and Information Technology Company, MTN Group, Omantel, PT Comunicacoes, Saudi Telecom, Telecom Egypt, Telkom South Africa, and Verizon. With the exception of Telecom Egypt, Saudi Telecom and Bharti, the members of the EIG consortium are not involved with any of the other planned projects on the route.

Industry executives fear a new price war on these routes. They are undoubtedly right.

Qwest Reports "Steady" Results

Gary Kim — Tue, 06 May 2008 08:34:24 -0700

Under the current challenging circumstances, "typical" or "normal" performance is a good thing. And Qwest Communications International reported "steady operating results" for the first quarter of 2008. Adjusted EBITDA totaled $1.14 billion with adjusted EBITDA margins of 33.6 percent as data, Internet and video revenue grew by nine percent compared to the first quarter of 2007.

Broadband subscriptions were up 17 percent year-over-year while video subscribers were up 42 percent, year over year. Total data, Internet and video services revenue now represents nearly 40 percent of operating revenue.

The business market segment reported revenue of $995 million in the first quarter, up 3.1 percent year over year as data and Internet revenue grew 6.9 percent. Data and Internet revenue grew 29 percent over the same period a year ago.

Mass markets revenue was $1.48 billion in the quarter, a 0.7 percent decline compared to the prior year. Data, Internet and video revenue growth of 20.7 percent was offset by declines in both voice and wireless services.

Consumer average revenue per unit increased 7.8 percent to $55 from $51 a year ago. Qwest Broadband subscribers increased 90,000 in the quarter to reach 2.7 million, up 17.2 percent from a year ago.

Wholesale Markets reported revenue of $841 million in the quarter, down seven percent year over year largely due to long-distance revenue pricing and supplier consolidation. Data and Internet revenue was up three percent year over year.

VoIP Server Licenses Up 67% Globally

Gary Kim — Tue, 06 May 2008 08:01:33 -0700

Whatever instability may be coming in some parts of the U.S. VoIP market, global growth--especially in Europe--is robust. The most recent analysis by iLocus shows 67 percent annual growth in VoIP server licenses sold globally, with traffic up 35 percent.

For the second consecutive year, Europe outpaced rest of the world in VoIP penetration. All major European operators--whether wireline or wireless--have a VoIP offering in place and have announced that they will be deploying IMS platforms.

The difference between deployments in the U.S. and European markets is the attitude and actions of incumbents. In the U.S. market, incumbents have not yet decided to make a major effort to sell VoIP; in Europe that already has happened. Because of carrier reluctance, challengers, especially the cable companies, have made significant market share gains.

What happened in Europe will happen in the U.S. market, however. At some point, AT&T and Verizon will decide to push VoIP aggressively, and the dynamics of the market will shift as much as they have in the fdial-up and broadband access markets, which initially were dominated by independent providers.

But fixed line replacement isn't the only place to watch for change. VoIP as a mobility and Web or enterprise application is early in its development right now. Though it might seem inconceivable, revenues from those sorts of applications will one day be significant. If that is not apparent it is simply because applications and business models in the mobility and Web and software spaces are seminal. Even Skype, as popular as it is, only represents two percent or so of global long-distance traffic, for example. So it will take some time before anybody notices.

Still, note that nearly 25 percent of mobile virtual network operators--wireless providers that do not own their own networks--already offering or testing mobile VoIP. By 2010 more than two thirds say they will have a mobile VoIP offering in place.

Femtocells: A Business or a Nice Feature?

Gary Kim — Tue, 06 May 2008 08:00:33 -0700

ABI Research projects that 100,000 femtocell units wll ship in 2008. Volume deployments won't begin until 2010, when $100 price points will be possible, in volume. The other issue is whether femtocells are embedded in other widely-used consumer gear, such as Wi-Fi routers.

The really critical issue will be whether initial carrier deployments are supported by robust business models and service plans that extend beyond pure fixed-mobile substitution goals,” says ABI Research vice president and research director Stuart Carlaw.

The issue there is that some innovations are very useful and widely deployed, but don't necessarily create a business model. Wi-Fi is the best example of that. So one has to wonder whether femtocells will wind up being a very-useful technology--reducing service provider investment in macrocells, for example--or whether a new revenue stream of some sort can be created.

The most obvious example would be enhanced ability fo wireless providers to compete effectively in the wireline substitution business, where the new revenue stream is cannibalization of fixed line subscriptions. The other obvious issue is ability to sell voice-optimized fixed line broadband subscriptions.

French Internet Users: 94% on Broadband

Gary Kim — Tue, 06 May 2008 07:59:04 -0700

One of the enduring claims observers make about the state of U.S. broadband is how woeful it is compared to other nations around the world. Consider France, which deregulated its telecommunications market in 2004, leading to heavy competition. In fact, broadband now is nearly synonymous with Internet use.

In March 2008, 93.5 percent of at-home Internet users in France enjoyed a broadband connection to the Internet, down slightly from the 94.2 percent who did so in the previous year. That's significant. The primary reason consumers buy broadband access is to use the Internet. Someday that will change, but right now broadband really is a way PCs can connect to the Internet.

So 94 percent of all home users of the Internet use broadband to do so. That's serious penetration. So note that about 52.4 percent of French homes had a broadband connection in 2007. That's a bit higher than U.S. broadband penetration, which is just about at 50 percent.

The point is that France has been highly successful at getting broadband adopted by Internet users. Fully 94 percent of all Internet users have broadband.

But note that household penetration is about 52 percent. There seem to be more dial-up users in the U.S. market than in France. But the point is worth noting: household penetration might not be the best way to measure penetration.

A household that doesn't use the Internet is hardly a candidate for broadband aimed at Internet users. The more relevant measure is how far broadband has penetrated homes where the Internet actually is used.

Chatblog with Pangaea Networks

Hunter Newby — Thu, 01 May 2008 20:00:35 -0700

Hunter Newby: Kevin Rocks, Executive Vice President, Sales and Marketing for Pangaea Networks welcome to the Chatblog! What does Pangaea do in the networking world?

Kevin Rocks: Thanks Hunter. Pangaea Networks are a metro Ethernet transport provider that operates in the NYC/NJ area. Our main focus is in providing our customers with rapidly deployed, end to end Ethernet connectivity solutions from the Enterprise to the carrier core. The PANMetro Ethernet product suite is made up of three different types of wireline Ethernet service, Layer 2 Ethernet Private Line, Layer 1 Ethernet Private Network, and Ethernet over SONET. We typically establish a full rate GigE NNI with our customers, and add new circuits over the same span as individual VLAN's. For the Enterprise customer, this is a point to multi-point configuration to connect remote (10/100) sites with an HQ or DR facility. For the Carrier customer, the NNI helps facilitate multiple connections to their individual end-users that they are providing IP transit services to.

HN: Ethernet sure has come a long way and is now fully mainstream in the wide-area. What is your customer mix between enterprise and carrier? What are the main applications/drivers for each group?

KR: Our customer base is predominantly carrier, around 90%. However, we have and will continue to target select enterprise customers directly particularly those that have a large presence in this market and are already Ethernet savvy. The main application drivers for the carriers are of course IP transit, and other core services such as voice, video, and data. For the enterprise customer, connectivity between remote office locations and redundancy are the primary drivers. These applications tend to overlap since ultimately, the enterprise is driving the carrier to offer scalable Ethernet services within the metro.

HN: Ethernet being driven by and from the enterprise is very logical and continues to grow, so you are in a good place. What type of network design does your company use in the core and at the edge (Z location) to support this growing need for Ethernet?

KR: Pangaea uses a traditional HUB architecture in the core. Aggregation switches are deployed at key carrier hotel points of presence and connectivity is established at the edge via direct fiber builds and Network to Network Interfaces (NNI's) with select carriers. EPL is a layer 2, native Ethernet service with connectivity at the edge via a NNI, typically at the 10Gig level. Lower speed circuits are mapped over the pipe as VLAN's that are aggregated at the core and then distributed as individual circuits over Pangaea's fiber to the carrier or end-user customer. EoS is conversion of SONET/TDM circuits at the edge and distribution as Ethernet in the core. EPN is a layer 1 Ethernet service with Pangaea sourcing the dark fiber to a particular enterprise building or data center. Pangaea then provides, manages, and maintains the edge termination switch and transports the circuit back through the core to the carrier PoP or end-user site.

HN: All Ethernet and no IP in your network. That is very clean, simple and seems very easy to understand and probably use for most savvy IT professionals. Pangaea is the name of the original land mass on planet Earth about 250 million years ago. That is when all of the continents were connected - essentially on-net to each other. Is it the philosophy and also mission of Pangaea Networks to reunite the planet using Ethernet?

KR: That is correct. Pangaea are the enablers for service providers and carriers that sell IP services, or enterprise customers that want to connect to a particular ISP or peering facility. However, the carrier or end-user need not be technologically savvy. They can be the plug and play type; just give them the pipe and a port to plug into, let the carrier handle the router and the IP. Others are very specific in terms of their requirements, whether we configure our switches for single or double tagged traffic, Q in Q, latency statistics and usage reporting, etc.

And yes, your interpretation of the philosophy and mission of Pangaea Networks is also quite correct. The only caveat that I might add is that many of the networks on the planet either originate or terminate in the NY/NJ metro area. This is the part of the planet that Pangaea intends to "reunite" using Ethernet.

HN: What do you think about the public Internet (and by default ISP's) being congested by video files (whether up/downloaded, or streamed) - does the necessity to avoid congestion help to drive your Ethernet transport business in New York?

KR: Yes it does. The enterprise that is transmitting and receiving videos or streaming typically requests high capacity (10GigE) diverse, low latency connectivity. This requirement is a primary driver for Pangaea's Ethernet Private Network [EPN] service.

HN: So as the Internet continues to fill up with video the demand for your services will continue to expand. It sounds like Pangaea has it all together in the Ethernet world, especially in New York City! Thanks for Chatblogging.

KR: Thank you, Hunter.

For those interested in learning more about Pangaea Networks please visit www.pangaeanetworks.com, or contact Kevin at krocks@pangaeanetworks.com

ADVA Introduces First Carrier Ethernet NNI

Gary Kim — Wed, 30 Apr 2008 19:12:11 -0700

ADVA Optical Networking has launched the FSP 150CM, said to be the world’s first carrier-class modular Ethernet Network-to-Network Interface demarcation device, offering carriers a simplified solution for bulk termination of Ethernet services or inter-carrier handoffs required for wholesale service applications.

Why is that important? Ethernet, once a "best effort" service, is now carrier grade. But that's not all, says Fred Ellefson, Adva VP. "Over the next five years it will turn into a transport infrastructure that looks an awful lot like SONET."

If that indeed turns out to be the case, NNIs will be essential and widespread.

But consider the irony! A connectionless, best effort protocol, transformed into a connection-oriented protocol with protection switching as fast as SONET and the ability to predict performance well enough to offer service level agreements.

A protocol designed for bursty communications transformed into a protocol that supports quality of service for real-time services, encapsulated T1s, T3s, OC3s and OC12s.

That's a change no less unsettling for some, or as remarkable for others, as a connectionless, best effort Internet incorporating quality of service and class of service mechanisms to support real-time services.

Sutus Adds Financing Option

Gary Kim — Tue, 29 Apr 2008 09:49:19 -0700

Sutus, a provider of "single appliance" business voice and data networking, has partnered with HLC Capital to provide equipment financing for its channel partners. HLC Capital provides lease financing for businesses that prefer to lease or rent their equipment rather than buy it.

Sutus sells an all-in-one device that combines all IT data communications and telephony features required to run a modern-day office, including the phone system function plus file server, email server, router, firewall, wireless access point, VPN remote access server, automated backups, and support for both standard phone line and VoIP connections.

Sutus also has teamed with CommPartners to provide a packaged equipment plus connectivity offering including SIP trunking, broadband access, toll free and other services on a nationwide basis in the United States.

Though it remains possible for some firms to persist in making a living selling access connections, average revenue per user considerations are forcing just about every provider to package other services around the connection.

That is as true for tier one mass market wireless providers as it is for Internet service providers, cable companies, data networking specialists, CLECs or wireline telcos.

The Death of (international) Distance

Scott Wharton — Mon, 28 Apr 2008 07:26:02 -0700

For years, telecom insiders have derided flat rate billing as "fad" that was not practical and going away. As recently as 4 years ago, I moderated a panel at the VON conference with leading industry analysts who unanimously said that that flat rate billing for voice would never take hold.

We all know that in the US, flat rate calling for both local and so-called long distance calling is now the norm. And in the last year, some of the independent residential VoIP players made International calling part of their flat rate packages (e.g., Lingo, BroadVoice, and more recently Vonage).

Skype took this to a whole new level last week by introducing a package of flat rate, unlimited international calling for $9.95. Now granted this is only to 1/3rd of the world's population (most of the developed world) and mostly to fixed lines (calls to mobile phones in most of Europe and Asia cost extra).

But let there be no doubt that this is just a matter of time. The marginal cost of completing a call to China cost little to no more than completing a call to Chicago. Watch for these international calling plans to be expanded over the next few years to the point where today's young generation will drop the term "expensive international call" just like today's adults no longer think about the cost of "long distance".

MetaSwitch Integrates with iGoogle and Salesforce.com

Gary Kim — Sat, 26 Apr 2008 17:06:57 -0700

MetaSwitch announced integration of its CommPortal subscriber interface with iGoogle and Salesforce.com, a demonstration showing how click-to-dial experiences can be added to both Web sites, allowing service provider customers to use MetaSwitch click-to-dial, contact integration, visual voicemail, and other features.

By exposing its telecom technology to Web-based services through open application program interfaces (APIs), service providers can create "mashups" of soft switch features with Web services.

The development also shows how soft switch providers are becoming competitors of BroadSoft and Sylantro.

"In demonstrating that underlying technology – such as click-to-call – in MetaSwitch’s CommPortal subscriber interface can be easily integrated into Web-based productivity and social networking applications, the company has added significant value to its product portfolio," says Joe McGarvey, Current Analysis principal analyst.

"The biggest shortcoming of MetaSwitch’s public endorsement of the Web 2.0 model is that it comes after most of its rivals have announced similar support," McGarvey says.

Most of MetaSwitch's customer base arguably lack the resources and knowhow to exploit the MetaSwitch Web services APIs, so it is an almost foregone conclusion that MetaSwitch itself will move down the path of creating a developer community on behalf of its service provider customers.

The other obvious observation is that much remains to be done in the areas of realizing value from mashups that can be created using the MetaSwitch platform. In some cases, the new features simply will increase service value, hence customer stickiness.

What generally remains to be seen is how new revenue-generating services might be created. But that's an issue virtually all service providers now face.

VarPhonex Adds Reseller Tools

Gary Kim — Sat, 26 Apr 2008 14:12:24 -0700

Create-a-Plan allows resellers to design and create their own custom monthly calling plans by choosing the countries, type of service (such as fixed and mobile) and number of minutes included each month. It allows resellers to control top end usage on unlimited plans or build metered plans with a set number of minutes.

The Custom Dial Plan will allow resellers to "normalize" dialing. By default, the customers of our resellers must dial 011+ when making calls outside of the United States and Canada and 1+ when making calls to the US and Canada.

The new tool allows resellers to eliminate the 011 dialing.

These days, VoIP differentiation is more about the small things than dramatic new features.

Qwest Introduces 20 Mbps Access Service

Gary Kim — Thu, 24 Apr 2008 08:28:24 -0700

Qwest has launched a 20 Mbps downstream, 896 kbps upstream access service called Qwest Connect Platinum, available on a "naked" basis without the requirement for buying a voice line at the same time, and costing $109.99 a month.

Qwest also has unveiled a 12-Mbps service as well.

Signing a two-year contract locks in that price "for life."

Qwest Adds Equipment Rental for Wholesale Customers

Gary Kim — Wed, 23 Apr 2008 14:33:24 -0700

As part of an initiative to provide its wholesale partners with features they have been asking for, as well as support more-comprehensive offerings, Qwest Communications International Inc. now will allow its wholesale data/IP customers to package data networking service and customer premises equipment

Wholesale data/IP customers now have the option to rent hardware from two of the leading equipment providers with their data networking services, Qwest says. The move is recognition that solutions now require more than simple "circuits."

Jaduka Adds Audio Conferencing API

Gary Kim — Tue, 22 Apr 2008 16:20:41 -0700

Jaduka has added audio conferencing to its Web services application programming interface, allowing all sorts of enterprise applications to embed audio conference capability directly to the applications they already use. Lead candidates include sales force automation tools, Intranet or customer relationship management software.

In some ways, the move "turned traditional conferencing on its head," says Jack Rynes, Jaduka president. Where lots of industry professionals and users think of audio conferencing as a feature of a phone system, or a service bought from a service bureau, Jaduka thinks about audio conference as a feature of some other application.

"We thought of it as a programming tool," says Rynes.

That's just another example of how things are changing as the world of software and the world of communications collide, blend and reform. Sooner or later, and the tipping point is not yet within sight, communications-enabled software is going to acquire such ubiquitous presence that stand-alone or "point" services will suffer.

One way to look at matters is that all communications devices and applications are becoming "software-mediated" features. You expect to buy a PC and use lots of applications. At some point, people will have become accustomed to having communicatons embedded into virtually every important type of software they use as well.

That's a different sort of business, indeed.

Chatblog with the Big Apple Peering Exchange

Hunter Newby — Tue, 22 Apr 2008 07:34:20 -0700

Hunter Newby: Shrihari, there are several different services that Stealth provides and some people might not be aware of all of them. Could you list them and give a brief description of each?

Shrihari Pandit: Stealth has been a provider of telecommunication services. The company originally offered commodity services such as Internet Access/Transit and Ethernet transport services primarily to the enterprise and government market since the mid 90's. With the transformation of our industry, we have also been in a transition from providing commodity services to providing specialty interconnect services such as the Big Apple Peering Exchange (used by carriers to exchange IPv4 and IPv6 Internet traffic), Financial Medium (a financial extranet) and the Voice Peering Fabric (functions as a meet-point for companies to exchange VoIP traffic.)

HN: Transformation and more importantly the ability to transform are essential and it seems that you have been able to manage that quite well. In terms of your business roots in Internet Transit, what role did traditional Internet Peering play and how has that changed over the years - if at all - leading up to the Big Apple Peering Exchange?

SP: Stealth has operated an Internet network, that interconnected [peered] with over 200 other IP networks, to support our IP transit service offering. In 2000 we implemented IPv6, a new Protocol for the Internet that provides larger address space. Shortly after, we created the NY6IX, an Internet Exchange Point (IXP) that was dedicated to facilitating the growth and exchange of IPv6 traffic in North America. The service enables its members to route traffic among one another directly without having the need of provisioning tunnels or dedicated connections. Its initial members were the Deptartment of Defense, France Telecom, IIJ, KDDI and Sprintlink. Later in 2005, NY6IX was renamed to the Big Apple Peering Exchange (Big APE), enabled IPv4 peering and added many new members including Google and Microsoft.

HN: Using IPv6 back in 2000 - wow, early days! It is evident that peering and transit have played a major role in the history of your business for several years and you have had success with it. Given your history and experience, what do you see as the future of peering and transit as video traffic increases on the web? What role will the Big APE play in that future?

SP: The demand for peering is accelerating in a major way, and is maintaining the sustainability of the Internet. Video is certainly the main application that's pushing the demand on broadband providers. Take BBC's video iPlayer for example, it has created havoc in the London region putting strain on major European ISPs to upgrade their networks to accommodate the increased volume of traffic.
Various reports now indicate that we may start seeing Internet brownouts as early as 2010. To streamline network and traffic flow, there are talks of networks converting from a Layer-3 (IP router) core to a pure photonic/Layer-2 core and start peering on a more local/regional basis compared to just peering at international gateway cities.

Naturally Big APE is here to facilitate the localization of traffic by providing a platform for the peering and interconnection of IP networks in the New York area. With the support from Telx and Force10 Networks, Big APE is now home to over 30 connected organizations and carries on average 12Gbps of traffic.

HN: The BBC iPlayer is very interesting and radical in terms of the demands on public IP networks in the UK like Tiscali. The British Telecom 21st Century Network design plays in to this as they had the foresight to move to a Layer 2 core years ago. Based on what you've said the required changes and associated time/costs for others to upgrade to support this type of video application gives BT an advantage in that market.

Would the same be true for Verizon (FiOS) here in the US? If so, wouldn't an "iPlayer-like" application from someone such as ABC, or NBC do the same for Verizon and quickly marginalize the ISP's in the middle with limited layer 2 capacity and no end users?

SP: From my understanding, Verizon FiOS network should have ample bandwidth capacity to the homes for carrying IP traffic. The issue may not be with the access-side of the network but whether the Verizon FiOS core network can cope with the aggregate traffic, and how they plan to localize traffic with local/regional providers through peering arrangements.

To answer the question of ISPs in the middle, they could be the thing of the past as the Internet and peering architectures and business models evolve. It is only natural for providers to take advantage of peering, in an effort to decrease operational cost (associated directly with IP transit expenses) and to gain operational efficiencies.

HN: I suppose video on the Internet is bringing things to a breaking point sooner rather than later. Shrihari, as always, thank you for your time and insights.

SP: No problem, thank you.

For those interested in learning more about the Big Apple Peering Exchange visit www.bigape.us , or contact Shrihari at spandit@stealth.net

Undersea Cable Boom: Price War Coming?

Gary Kim — Mon, 21 Apr 2008 12:52:53 -0700

The undersea cable business continues to be stuck in a cycle of feast, famine, and feast again, say analysts at TeleGeography. The undersea cable business is in the midst of a new investment boom, seven years after the first boom flooded the market with excess capacity.

TeleGeography projects that at least 25 new cables, costing approximately $6.4 billion, will be constructed between 2008 and 2010, and this figure is likely to rise as plans for a number of other proposed cables solidify.

The investment boom is global, with new cables planned for every regional market, with the exception of the Atlantic, TeleGeography says.

Capacity is not the driver, though, in a strict sense. Less than 25 percent of potential capacity on existing subsea cables on major subsea routes is active. Rather, new cable projects are forming out of a need for a broader range of restoration options in case of cable failures, the desire for more diverse routes between two destinations, and stubbornly high capacity prices in markets that have ample capacity but few competitors.

There is a real risk of oversupply in both Africa and across the Pacific, TeleGeography believes. Industry executives have been hoping rationality will hold, once the cables are activated. We shall soon see.

Covad Now is Private

Gary Kim — Tue, 15 Apr 2008 14:39:48 -0700

Platinum Equity has completed the acquisition of Covad Communications Group. Platinum Equity paid $470 million for Covad. What will be interesting to watch is how Platinum Equity might steer Covad to create more value. As a rule, Platinum Equity looks for "orphaned" assets that are deemed non-core by a larger entity. Covad isn't precisely that sort of asset, but Platinum tends to emphasize business continuity, so one would presume management will be reassuring current customers and partners that jarring transitions are not forthcoming.

Platinum tends to want to provide "uninterrupted customer service, minimal employee uncertainty, and preservation of the seller's brand reputation."

Before a transaction closes, the company says it will already have developed a long-term business strategy. So we must assume Platinum Equity already knows what it has in mind for Covad. Once the plan is put into place, Platinum Equity is expected to allow company management to run the company. That, at least, is what it prefers to do.

IP Services Require Control, Not Just Visibility

Gary Kim — Tue, 15 Apr 2008 05:25:50 -0700

As important as it is, visibility into what is happening with IP applications is not enough, say executives at ITS-Omnicom, a Simi Valley, Calif.-based provider of premises and wide-area communications and network solutions.

Sharon Woods, ITS-Omnicom CEO says "broadband is something everybody in small business seems to be asking for." More often, those customers also are asking for managed services of various types, delivered over a common access pipe.

That inevitably raises the issue of how to provide quality of service and experience. And ITS has found that its own business is enhanced when it is able to fix problems, not just find them, using the Streamcore quality assurance solution.

"As many as 60 to 65 percent of IT professionals are embracing managed services," says Mel Melara, Streamcore regional VP. Enterprises can control the quality of those services but SMEs have the same need."

A service provider must correct issues, not simply find them, he says. And since most smaller business executives aren't technicla, They just want services to work, and will expect their providers to do that on their behalf.

"End users, especially SMEs, increasingly want to leverage technology expertise, and that has to be outsourced," says Sharon Thompson, Streamcore VP.

XO Anywhere Aimed at Remote and Traveling Workers

Gary Kim — Tue, 15 Apr 2008 04:43:09 -0700

XO Anywhere is a new service from XO Communications aimed at remote and traveling workers. Basically, where XO up to this point has concentrated on services for primary business sites, it now is targeting the needs of workers permanently or frequently working off site, and giving them access to the business system's features.

The new package includes features such as simultaneous ring and the ability to make or receive calls from any device, display theoffice phone number on the oubound caller ID, and charge all calls to the office account.

Click to dial integrated with Microsoft Outlook and Web browsers also is provided. Users simply select and click on any contact or phone number displayed on any Web site to make a call. And where office feature customization has been centrally managed, XO Anywhere allows each end user to control preferences.

Nic Jackson, director of voice and converged services, says XO Anywhere is available to users of XO IP Flex and XO IP Flex with VPN.

Pricing is on a flat fee per month basis. XO Anywhere is ordered just like any other feature, Jackson says. A customer requests the feature. XO assigns licneses to users in the XO IP Flex portal. Each user receives an email from XO with instructions and downloadable client. The customer downloads client and installs the toolbar.

New Edge MPLS Over DSL Now is Generally Available

Gary Kim — Mon, 14 Apr 2008 15:54:50 -0700

New Edge Networks has gone to general availability with its Multiprotocol label switching Service over digital subscriber line. The feature allows business and organizational customers to tag and prioritize data traffic over their DSL access using up to five MPLS classes of service.

Until now, MPLS class of service priorities for copper-fed customers were available only on T1 lines, the company says.

New Edge offers its new service directly and through selling partners nationally in most areas where DSL is available, and will especially helpful for companies running real-time services such as VoIP or video over their DSL access networks.

New Edge is pricing its new service at a $100 premium over the cost of a fully managed DSL-based private network, which averages about $140 a month, per location. This price step-up includes bandwidth optimization with up to five classes of service over DSL access, improved service level guarantees, and a Cisco router upgrade.

In many cases, the monthly cost for an equivalent T1 line can start at about $500, with MPLS class of service features and network management available as options.

New Edge instituted improved service level guarantees on its new service. These include an 18-hour mean time to repair (MTTR) for a DSL line with the class-of-service option. The industry benchmark MTTR for a regular DSL line is 24 hours. In contrast, the MTTR for a T1 line is four hours, the company says.

From "User" to "Persona"

Gary Kim — Sun, 06 Apr 2008 06:16:56 -0700

One way or the other, fixed mobile convergence ultimately is going to move beyond simple interworking of basic services across some mobile and fixed devices. Services, in fact, ultimately will be provided on an access-agnostic and device-agnostic basis, at&t executives say.

That fundamental shift will alter the business environment for lots of competitors in the market, if only because customers will come to a different understanding of what a particular service is, what features it offers, what it should cost and how it is used.

The other possible change is that "service providers," who typically prefer to operate "walled gardens," mighjt increasingly find themselves operating as "application providers." If a communication service or experience becomes access and device agnostic, why should a Qwest service operate differently when accessed from a Verizon or at&t local serving territory?

In other words, the future FMC environment will technically allow the possibility that a "walled garden" service actually behaves like a Google application. Use whatever access you have and whatever device you prefer: the application will look and feel the same as if you were using Qwest local access, even if you are using the application and service in Atlanta, New York or Los Angeles.

In fact, incumbents already have grasped the direction: as the Internet separated access from applications, so fixed-mobile convergence necessarily breaks the link between "service" and "access." That isn't to say providers will stop providing "walled garden" services. It is to say the services will not be captive to the access link.

Going further, not only will the physical link between service and access be sundered, even the applications will focus on "roles" rather than phone numbers, subscriber identity modules or other static references.

Identity today is associated with a device, an access or technology or network. In the future, the network must recognize identities and personalities and have different services attached to each role, says Siroos Afshar, at&t AVP.

The notion is that "users" become "personae" that are independent of the device and network. "We should not be thinking about supplying services to discrete devices, but rather services that can be invoked from any device, and that provide a similar user experience," he says.

"We won't in the future offer services designed for specific access technologies, just services," he says.We won't offer "cellular" or "DSL" service, but rather "voice." "You can use the service on any access," says Afshar.

This could result in a huge change: service providers will operate sometimes as access providers and sometimes as application providers. "Over the top" services will complement the access-based approach now prevalent.

That is going to change the market because it will change user expectations. Inability to transparently support wireless access will be an adoption inhibitor. Also, regional service footprints, while not unimportant, will be supplemented by application revenues. Just as one can buy Vonage and use it over any access, so Qwest customers might be able to buy services that work over Verizon access.

That is a different world.

4G, Data are Technologies, Not Services

Gary Kim — Fri, 04 Apr 2008 08:20:03 -0700

We have a recurrent problem in the communications business: we mistake functions for products. We talk about 3G or 4G networks as though the mere availability creates markets. Not true. VoIP technology does not create its own market.

Users don't buy the things we count as "data plan revenues." "Users don't talk about what they do as data, says Kristin Rinner, at&t SVP. "It's texting, or sending photos or whatever they actually do."

So what has 3G proven to be worth, so far? "About 20 percent revenue lift over a 2G customer," says Rinner. Still, some might consider that quite a disappointment. True, traffic on the at&t wireless network is up fold between 2006 and 2007, says Rinner. But revenue is up just 20 percent.

And keep in mind that 3G required unique spectrum and construction of a whole network. One might have hoped for more. Fourth-generation networks are going to face the same problem. The network doesn't create its own demand.

"I don' t think there is a single killer app or even a category that by itself drives the 4G transition," she says. "Most users don't take advantage of most of what we have available today."

Still, something is happening. "Now what we are seeing is that we are exceeding the growth rate of data usage that was characteristic of the Internet," says Rinner.

Google Bid in 10 Rounds of C Block Auction

Gary Kim — Fri, 04 Apr 2008 06:55:12 -0700

If Google could have won the 700-MHz C block spectrum at a price somewhat higher than the reserve price, it would have done so, say Richard Whitt, Google Washington Telecom and Media Counsel, and Joseph Faber, Google Corporate Counsel.

Though Google's top priority heading into the auction was to make sure that bidding on the C block reached the $4.6 billion reserve price that would trigger the important "open applications" and "open handsets" license conditions, for many days during the early course of the auction, we were the high bidder, they say.

"In fact, in ten of the bidding rounds we actually raised our own bid, even though no one was bidding against us, to ensure aggressive bidding on the C block," Whitt and Faber say.

They also reiterate Google's intention to remain active in the policy process. "We'll continue pushing to help make the wireless world look much more like the open platform of the Internet," they say.

And if you think about it, that is the same story Sprint Nextel is telling about its Xohm WiMAX network. Xohm is about the next generation of the mobile Web or mobile Internet or mobile IP. That's a very different core vision than now exists, and a vision more broadly shared with Google than with Verizon or at&t.

Backhaul Delays Xohm Launch

Gary Kim — Thu, 03 Apr 2008 09:40:17 -0700

Sprint Nextel CTO Barry West says the Xohm WiMAX network launch officially is delayed, in part for reasons those of you in the enterprise acess business surely will understand.

WiMAX cell sites need to support 2 Mbps to 4 Mbps connections for each user. So Ethernet connections would seem to be ideal. But West says it has proven tougher than originally thought to get those pipes. Backhaul, in other words, is holding upactivation of the service.

Tougher Times in VoIP Wholesale?

Gary Kim — Sun, 30 Mar 2008 06:29:14 -0700

With the caveat that one typically can explain year-over-year revenue declines by looking at shifts of market share, Deltathree's most recent annual report is sobering.

For the full year 2007 period, Deltathree reported total revenues of $29.5 million compared to $38 million in the full year 2006 period, a decrease of approximately $8.5 million year-over-year.

Likewise, revenues for the fourth quarter of 2007 totaled $6.3 million, a decrease of $2.4 million from the $8.7
million reported for the fourth quarter of 2006. And as has been the case for many other service providers, without acquisitions the numbers would have been far worse.

The revenues in the first nine months of fiscal 2007 include approximately $2.4 million of revenues related to the Go2Call acquisition. Without this acquisition, our historical revenue base would have been lower by $7.1 million in total or 30.3 percent, Deltathree says.

The company also has gotten a delisting notice from the Nasdaq Capital Market.

"In addition to our decrease in reseller and service provider revenues, our revenues from VoIP telephony services--primarily PC-to-Phone and Broadband Phone--decreased by $1.4 million or 31.8 percent to approximately $3.0 million for the nine months ended September 30, 2007 from approximately $4.4 million for the nine months ended September 30, 2006, due primarily to a lower number of PC-to-Phone and Broadband Phone calls being placed by a decreasing user base," the company says.

Key issues include competition in the direct-to-consumer market for VoIP services, certain non-differentiated reseller markets, as well as the expected expiration of one of the company's hosted consumer VOIP agreements.

As a result, Deltathree is shifting effort and attention to higher value differentiated VoIP solutions, such as hosted consumer VoIP solutions for service providers and resellers, and markets that are less price-sensitive.

Basically, Deltathree experienced sequential growth in hosted VoIP, and declines in the reseller segment.