Hosted VoIP

In my last column, I briefly outlined three platform play scenarios — Ifbyphone, Ribbit and Jajah. I see these companies as a progressive continuum along the spectrum of platform plays, with Jajah being the most comprehensive. In this column, I’d like to explore Jajah a bit further, and hopefully provide more substance to support my position.

 

One way to do this is to go straight to the source, so last week I spoke with Trevor Healy (News - Alert), Jajah’s CEO in preparation for this article. The key points from our conversation are presented below, but before getting to that, I’d like to share something else from Jajah that was just announced this week.

 

During the recent CTIA conference, Jajah interviewed several telecom executives as the basis for some thought leadership research that has just been published. Titled Telecommunications Industry Issues Index, this is a high-level barometer of what is on the minds of telecom operators. I think it’s a great initiative, and hope they continue this effort as means of gauging how market sentiment changes over time.

 

Below are five key takeaways that I believe are helping create the market conditions for platform play solutions like Jajah. There are other notable findings in their research, and I urge you to follow up directly with Jajah for more details.

 

 

These issues warrant far more analysis, and perhaps I’ll explore these another time. I just wanted to capture the essence of these findings as they pertain to the platform play theme of this article. This research is especially powerful for Jajah because their platform and network can help any type of service provider succeed in today’s market.

 

Jajah can help incumbent fixed line operators protect their subscriber base by enriching the service offering. They can help wireless operators broaden their service mix as well as extend their reach into new markets for voice calls. Cablecos will benefit by deploying a scalable, turnkey voice solution to enter the telephony market. Internet portals also stand to gain by outsourcing a carrier-grade voice platform that is Web 2.0 friendly for both end users and developers.

 

With that, I will now segue into my interview with Trevor Healy from last week, which I hope will give you a better understanding of what I’m seeing in Jajah in terms of being a complete platform play. If you wish to add your take – either pro or con – please share them with me as this topic is certainly open for further exploration.

 

 

TH: It’s exactly what we’re seeing in the marketplace. Every service provider we talk to has the notion of adding value added services over the network layer. In the broadband world the cable operators were reduced to being dumb pipes, and when you look at who was actually gathering the revenues in this space, it was Google. Service providers in both the mobile and landline worlds are keen to make sure this doesn’t happen to them.

 

So, they look at their network layer now that was once a competitive advantage, and now it’s table stakes. Both their consumer and enterprise customers are coming to them asking for value added services and more of a platform on top of the network. They’re looking at applications around what we call the 3 C’s – Content, Commerce and Communications. Carriers want consumers to look at them as their primary provider whether in the home, on the go, or at their place of business.

 

 

TH: The guys who are struggling the most are the pure play fixed line operators. They’re seeing landline loss to Triple Play cable companies and mobile operators, as well as emerging providers with IM voice like Skype (News - Alert). They may be the most at risk, but they also have the greatest opportunity. Because they have a presence in the home, they can be the first to offer broadband services. They certainly have the greatest need and sense of urgency.

 

The mobile guys still have serious levels of earnings and growth, but the fixed line guys are losing thousands of landlines a week, and it’s affecting their overall value. For example, with operators like AT&T or Deutsche Telecom, every 1% of landline loss represents about a half a billion dollars in market value – it’s a serious problem. Even though they have fantastic mobile businesses, the landline operations continue to be a drag of profitability. So they’re now moving to a platform approach with IP services, and trying to shift consumer dollars away from landline to these new services.

 

 

TH: For us, it was following the market need. Early on, we had a strategy to open up the platform, but we weren’t sure how much they would accept it. Also, we think there’s an absence of a managed services infrastructure for these types of applications. Some will provide them for a specific market vertical, but there is no company providing an end-to-end approach, and that’s the need we’ve chosen to address.

 

To do this, we had to first build out a global infrastructure, which requires significant upfront investment. For the network, we had to interconnect with the Tier 1 carriers at their hubs globally. That included putting up data centers in London, New York, Frankfort and Dublin. We also had to upgrade our team around termination and trading voice minutes. Today, we have two or three people who trade minutes globally every day. It’s almost like trading orange juice or pork bellies, where we’re trading minutes of usage around the world.

 

That’s a seismic shift for a business like ours where you go from doing stuff on behalf of yourself to doing things on behalf of others. For example, we’ll go to Singapore Telecom and say you’re not strong in Poland, but we are. So, we’ll do an arbitrage deal with SingTel (News - Alert) for minutes, lowering our costs in and out of Singapore, and their costs in and out of Poland.

 

 

TH: Think about the termination as foundation. It’s just something you have to have – it’s not strategic – the carriers just expect it. Really, where we win business is on the front end, where the innovative applications are. The key thing here is that the carrier won’t do business with you on the front end unless you have a solid network foundation on the back end. That’s where a lot of our competitors fall short. The carriers feel that the applications can be done by many, but the combination of applications plus the network can only be done by few.

 

 

TH: Well, as their network grows, they want to improve quality. Take Yahoo, which we recently won. The key for Yahoo was that their existing voice business was based on Dialpad’s technology, but the call quality wasn’t where it needed to be. With the Internet portals, as the market moves from early adopter to early majority, you start seeing the expectation for quality going up exponentially. So, unless quality improves, their business will quickly reach a growth ceiling. That’s where companies like us come in.

 

They’re also realizing that voice is not something you can do as a side business. This is pretty serious stuff. You have to continuously innovate around the platform, and that takes a lot of resources. The big players like Microsoft, Yahoo and AOL have the wherewithal to get a voice business up and running – however, keeping it current and at a high quality level is a different proposition.

 

 

TH: They really need to understand that their business is shifting. The world is shifting to IP networks. Those who recognize it early will embrace it more. It’s not much different from the music business that has transitioned from selling LPs and CDs to selling digital music. The same thing is occurring in our industry but we’re just at the start of it.

 

When you talk to the CTO or Chief Strategy Officer of a major carrier, every one of them gets it. You may have inertia at the lower ranks, but the people at the senior levels really get it. Once they see the fact that people are waking up every morning and checking their Facebook before checking their voicemail, then they see that there’s a transition happening here. That’s the point where they see the greatest value of our application.

 

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