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Packet8 Takes a Lead 

July 18th, 2007 by Carolyn Schuk

Packet8 has inked a deal to be the preferred replacement for SunRocket subscribers left high and dry when SunRocket abruptly shuttered its business operations this week.

The deal was signed, according to the press release, with “with an organization managing the wind down of SunRocket, Inc” — presumably Sherwood Partners LLC, the company named in other news stories about the defunct VoIP provider. SunRocket subscribers can port their numbners to Packet8’s $24.99/month unlimited calling with a free month of service and no start-up or equipment costs.

In a change from the disgraceful way the company has handled its end-of-life so far, SunRocket will be calling and emailing subscribers about Packet8’s offer.



Packet8, Others, Picking up the SunRocket Pieces 

July 17th, 2007 by Carolyn Schuk

SunRocket generates more interest dead than alive. The VoIP pure-play’s skulking exit has garnered attention from MSNBC, the International Herald Tribune, The New York Times and the Washington Post, just to name a few.

Other VoIP companies are wasting no time offering special packages to stranded SunRocket subscribers. Vonage is offering two months free service. Nuvio today announced a special $199.99 plan for former SunRocket customers. As I wrote yesterday, VoicePulse has been quietly helping SunRocket subscribers stay online.

Packet8 is also rolling out its own “no startup cost” plan for SunRocket customers — offering equipment, start-up, shipping and one month of service at no cost with its $24.99/month unlimited calling plan.

“We think we can port those customers fairly quickly because we use many of the same underlying carriers,” says Huw Rees, Packet8 Vice President of Sales and Marketing.

I confess, I like this story because it contradicts the Silicon Valley catechism, where it’s an article of faith that the race is to the swift despite the received wisdom of our ancestors.

In fact, it’s looking more and more like our ancestors were right, and the fastest and most aggressive don’t necessarily get the trophy. And they don’t for reasons that are yawningly simple and straightforward.

The first is that other people’s money is not a substitute for revenue — you need to sell your product for at least as much as it costs to deliver it. The second is that controlling your own product is a more secure foundation than reselling other people’s technology.

VoIP pioneer Packet8 presents an object study in these pedestrian principles, and it’s apt that SunRocket’s sunset coincides with the dawn of Packet8’s 20th year in business and its 10th year as a publicly traded company (NASDAQ (CM): EGHT).

A longtime developer of communications chips — Packet8 components were used in AT&T ‘s Picturephone — Packet8 offered one of the first consumer VoIP services in 2002.

“Since we launched our service, we charged customers a fair price, one that lets us cover our costs and make a small profit,” explains Rees. “We priced it so it’s a self-supporting business.”

Faced with cut-throat competition like SunRocket’s $199 pre-paid two-year service deal, “we decided not to compete,” continues Rees. “We know the costs of delivering service and it was obvious that the costs were greater than that.

“We focused more marketing effort on the small business market. Once you get that right, it’s a higher margin of profit. It really bolsters the bottom line.”

That strategy paid off. With about 8,000 Virtual Office subscribers, Packet8 is the number one U.S. provider of hosted PBX services for small businesses, according to a 2007 study by telecom analyst AMI Partners.

At the same time, Packet8 never lost sight of the consumer side of the business.

“We have 100,000 consumer [accounts] and those are key because that base provides us with economies of scale — for example, PSTN termination.

Internally-developed technology is another key to Packet8’s stability — a contrast to SunRocket which licensed its technology from other companies.

“We have 68 patents in this [VoIP] technology,” Rees explains. “We co-invented the technology. Because we control the technology, [we control] quality, reliability, scalability. Over the long term, it’s helped us reduce our cost base because we don’t have to pay anybody for anything.”

All of which leaves Packet8 sitting pretty. “Last March we were close to cash flow breakeven and we’ve been improving that quarter-by-quarter,” Rees reports. “We’ve got over $12 million in the bank, $54 million in revenue last fiscal year — 67 percent over the previous year.”

Even with the SunRocket promo, Rees adds, “we’ll still make a profit and that should be good news for customers because we’ll still be in business.”



SunRocket Folds 

July 16th, 2007 by Carolyn Schuk

Predicted by many, VoiP provider SunRocket’s demise today was noted even by the New York Times. So far it appears that it’s every man for himself on the SunRocket Titanic, with management nowhere in sight and the company website still on autopilot.

So what do subscribers do now? It’s no surprise that at least one VoIP provider is looking to help SunRocket customers out.

“We’ve reached out to Sherwood Partners [the consultants handling the SunRocket shut down] today,” says VoicePulse CEO Ravi Sakaria. “We’re able to provide a migration path. We use a lot of the same underlying carriers as SunRocket.”

That means that many SunRocket subscribers can be up and running on VoicePulse VoIP service within 24 hours. Even before today’s dénouement, VoicePulse saw an influx of SunRocket customers, Sakaria reports.

VoicePulse offers an interesting contrast to SunRocket and one that should be of interest to VoIP industry analysts. The privately held New Jersey company has been profitable or at breakeven for the past three years, according to Sakaria.

The company’s recipe is like that of the tortoise of the well-known fable.

“The secret was to not pour a lot of money into marketing, and [aim for] slow and steady growth,” explains Sakaria. “We’ve offered unlimited calling for $24.99 a month for three years and we’ve never varied. That’s the price we needed to charge to be profitable.”

VoicePulse’s strategy has yielded about 40 percent growth year-over-year, every year, according to Sakaria.

“Four years ago when we launched the company we were seeing a 10, 20, 40 year endeavor,” continues Sakaria. “When you do that you have the mentality of how to develop a profitable enterprise and grow it from there.”

When you do this, he explains, you have the resources to reinvest in the business. For example, VoicePulse is getting ready to turn on a new, west coast POP which will deliver better redundancy for customers.

“We’ve been able to do that because of the money we generate,” he says. “Rather than struggling to stay alive, we’re able to bring customers a better calling experience.”

Not that Sakaria wouldn’t like VoicePulse to be a VoIP name brand.

“I would love for VoicePulse to be a better known brand, but not at the expense of operating at a loss. We haven’t figured out how to do that better than we are and still at a profit.”



CommBytes 7/11/07 

July 11th, 2007 by Carolyn Schuk

Businesses are looking to get mobile in a big way in the next 12 to 18 months, with 60 percent having or planning a mobility strategy, according to Mokena, IL-based Nemertes Research study.

Unified communications are also high on the corporate shopping list, according to a brand new Infonetics research report. The Campbell, CA-based telecom research firm reports 21 percent growth between 2005 and 2006 for sales of unified communications applications worldwide. Further, Infonetics predicts annual growth to continue “in the high double digits” through 2010. Infonetics also reports that Avaya leads the worldwide unified messaging market in 2006, but Nortel, Cisco, and Alcatel-Lucent are gaining.

Mobio — the people who think that you don’t really want the Web on your phone, just parts of it — now lets you take Twitter, Digg and Kaboodle on the go with three new free, downloadable widgets.

Mobile applications are a natural for health care. And the iPhone is a natural for drawing attention. So Unbound Medical has recently announced that its mobile medical knowledge system now runs on the iPhone. The company has been selling medical applications for handhelds since 2000.

Ucompass is also looking for iPhone strokes for its iPhone-enabled wireless systems for educators.

Avanquest Software’s Mobile PhoneTools will now be bundled with Lenovo’s Bluetooth-enabled notebook PCs, letting any compatible Bluetooth cell phone function as a modem when it’s connected to the laptop. No PCMCIA card or WiFi hot spot needed.

Another way to send voice messages without a phone call from Buzz Interactive.

Yesterday VoIP, Inc. launched the beta of its new communications portal Click4me that lets you make VoIP calls through any browser-enabled mobile device. The portal also offers email, calendaring, and other office applications.

Pre-paid long distance provider OneSuite yesterday debuted its new hybrid VoIP/PSTN service, OS Hybrid. Like the Prius, it lets you keep more green.

Motorola gets closer to an end-to-end portfolio with its acquisition of Leapstone Systems and its content creation, management and delivery platform.

Also looking toward the content delivery game, Level 3 today announced its acquisition of broadband and mobile video management and streaming services Servecast, Ltd.

The Rumor Mill Keeps Grinding: Low-end iPhone in the pipeline? Dream on, says Newsweek’s Thomas Claburn.



Samsung’s New Math 

July 10th, 2007 by Carolyn Schuk

Samsung’s convergence calculation goes like this. Routing + switching + VoIP + security = 1 — One box, one management interface, one architecture. Last month the Korean electronics giant introduced the U.S. enterprise networking market to Samsung’s new math with the Ubigate iBG Series all-in-one enterprise networking platform for SMBs.

Ubigate begs the question: does the world really need another box?

That’s a simplistic and narrow view, according to Samsung Director of North American Enterprise Networks Lynn Tinney. Ubigate, Tinney explains, is a foundation for converged communications.

“When you speak to customers, they’re speaking about investments: how can I make network operation more efficient. It’s not like they woke up one morning and wanted convergence. It’s coming more gradually, in terms of wise investment, pushed by [the need for] making end users more productive, getting more for their investment.”

To meet these perennial business objectives, the infrastructure has to be in place to serve up what end users need. But while big companies have many choices in today’s market, SMBs have a limited range of options.

“To reach an SMB market, you have to recognize that you’re putting a lot of functionality on a single box,” says Tinney. “It’s risky on the low end but cost makes it a bad financial decision on the high end.”

In other words, when you have a dominant market player — that would be Cisco, the elephant in this particular room — all solutions entail sizable compromises for customers.

Enter Samsung Ubigate iBG.

“We recognize that in the SMB market Samsung could develop a box that offered some clear advantages,” explains Tinney.

Ubigate iBG aims for the SMB sweet spot: cost, reliability, security.

The first place Samsung hopes customers will work the new math is in their costs. To start, Ubigate pricing is about 30 percent less than its “nearest competitor,” according to Tinney. Further, cost of ownership goes down as well, Tinney says, with less equipment and a single, browser-based network management interface. “Business gateways are new corner stones for any infrastructure, Samsung’s Ubigate can consolidate three or four boxes to one.”

Reliability is another part of the calculus that Tinney says makes a convincing argument for the Ubigate.

“Samsung’s long history of outstanding engineering delivers its worth to customers. They can feel confident Samsung brings to market a well engineered and tested solution. The Ubigate is built for redundant power supply to further ensure network reliability,” Tinney says, adding,”If there’s a flaw in it anywhere, it’s that it’s over-engineered.”

Finally, Samsung is also aiming to change the security versus performance equation.

“Security is often the feature that end users either have to sacrifice to maintain performance or accept slower processing speeds to keep the security levels,” explains Tinney. “With Ubigate, the customer can have AV, IDS, IPS, etc. without giving up on performance. Although I doubt the Ubigate will be looked at for only security, this is a critical benefit that goes to significant TCO and ROI.”

Finally, Samsung’s acknowledged expertise in the consumer market will give the Ubigate an additional market advantage, Tinney says.

“Strategic decision makers recognize that the end user is a consumer. Understanding the consumer is an advantage as we design our product. We understand that single user’s perspective.”

So how does that elephant in the room figure in Samsung’s math?

“It’s one thing to go out and buy a tennis racquet,” she says. “It’s another thing to learn how to play.”





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