THE PULVER REPORT: The April 17, 2000 Issue

THE PULVER REPORT™: The April 17, 2000 Issue:

In this Issue:

- Heard on the Net
- The FREE Telephony Revolution
- Recap: Spring 2000 Voice on the Net
- Industry Trends Observed at Spring 2000 VON
- Jeff Pulver announces Min-X:real-time
- SS7 in the pulver.com Open Test Network
- So You Say You Want A Revolution...Al Gore?
- Update - Instant Messaging 2000: May 23-25 - Boston, MA

Heard on the Net

- People on the Move:

- Lea King has left Concert Global Clearinghouse.

- Andy Schroepfer has joined Goldman Sachs.

- Matt Noah has left ADC Telecommunications to become CEO of netsuds.com

- Jose Garcia has left Lucent and joined Zhone Technologies as Director, Product Management responsible for Voice Gateway products.

- Jan Sihvonen has left Telia Light where he was Director of Marketing and has joined OZ.COM where he will have a business development role.

- Oh hankyun left LG Electronics and joined i2line as CEO.

- Park Min-soo left LG Electronics and joined i2line as Director of R&D.

- Mark Keithley, formally CFO Asia Pacific, Global One, joined oCen Communications as CFO.

- Mike Jablon left IBM and joined VocalTec.

- Boaz Michaely left VocalTec for Comverse Network Systems to work on Enhanced Services at the convergence of the Internet, PSTN and PLMN.

- Bertrand Chauvet left Dialogic Europe (Intel) and joined NetCentrex as Director, International Business Development (Please email: people@pulver.com to report a change in your position.)

- Companies on the Move:

An AT&T led consortium acquired a 39 Percent Voting Stake in Net2Phone for a cash investment valued at 1.4 Billion. CopperCom merged with DTI Networks. AudioTalk merged with HearMe. The VON(R) Industry continued to file their S1s during five weeks. Some of the companies which have filed include: Arbinet, iPass, oCen, Open Port, Sonus Network and XACCT. A number of companies have recently announced funding activities. Some of those reporting include: - InnoMedia raised $115M in funding from a variety of sources

- Mind CTI raised $15M in funding from Summit Partners

- Syndeo Corporation raised $18M in second-round funding

- Band-X raised $40M in second round funding from Goldman Sachs and Morgan Stanley.

- Taqua Systems raised $56.3M in third round funding.

For up-to-date daily Industry news, please feel free to visit ( http://pulver.com/news ). If you have news you would like to see posted, please email: editor@pulver.com. To schedule time as a a possible guest during May, 2000 on pulverradio.com ( http://www.pulverradio.com ), please email: matt@pulver.com.

The FREE Telephony Revolution

Not long ago, conventional wisdom was such that the phrase "There is no such thing as a free phone call" was understood to be true.

Boy have things changed...

Just about five years ago, with the help of Izak from Jakarta, Indonesia, Brandon from Tokyo, Japan and Connie from Tacoma, WA, the Free World Dialup ( http://pulver.com/fwd ) project was launched.

Life was a little simpler back then but the promise of the vision was to enable consumers to be able to make free phone calls by taking advantage of the internet. Nobody really challenged us on why somebody should contribute resources for free or asked "what's in it for me?" when asked to setup a single-port gateway. Instead we shared a moment in the history of the internet when consumers realized the internet could be used for more than just the sharing of email. Service providers didn't focus, and didn't care much about the "Free" part of Free World Dialup. (A network of one-port gateways was not a threat to anyone.)

Fast forward five years and now we have many service providers facing the dilemma of having to offer free services or risk losing market share. Look at the rise of all of the free internet service providers, free email hosting, free web pages, free disk storage, free instant messaging services, etc.

During the past six months a new revolution has effected the Internet - the FREE Telephony Revolution. Taking a look at some of the companies which I've been tracking who offer free phone services (see http://pulver.com/fwd ), and today one can find ways to make a free phone call! In fact, not only can you make free phone calls (both phone-to-phone and pc-phone), you can subscribe to services which offer you: free faxing ( http://www.efax.com ), free voice mail ( http://www.evoice.com ) and free Internet Call Waiting ( http://www.buzme.com ).

The viral power of delivering a reliable, free pc-to-phone service like dialpad.com, may have been one of the considerations Net2Phone took into account when they recently decided to sell the AT&T-led Consortium a 39 percent voting stake in Net2phone. One ironic twist of fate was the timing of this transaction...less than a week later, AOL owned Netscape started including Net2Phone bundled with the new Netscape 6.0 browser.

This said, over the next few months I expect to see the list of service providers offering Free phone service in the US to increase.

To the defense of the growing number of Free phone service providers, it is quite possible for a US based Free phone service provider to be profitable these days. It turns out during the past six months, there also has been a price revolution going on with respect to the wholesale price costs for US Domestic phone call termination. These days the competitive wholesale prices for US termination currently ranges from: 9/10th's of a penny to 1 1/2 cents a minute. (2 cents a minute is considered high.)

With these low costs, together with incremental income from advertising and the opportunity of the up-selling of premium services, it will be possible for some of these new consumer based Free Phone service providers to be profitable almost from the start.

Recap: Spring 2000 Voice on the Net

Spring 2000 Voice on the Net took place March 27-30, 2000 at the San Jose Convention Center. This conference was our largest VON conference to date with over 2,400 delegates attending from around the world. We also had an additional 1,200 people working in the exhibit hall which was home to 138 different companies. Over 35% of the attending delegates were from outside the US.

In addition to all of the planned activities at Spring 2000 VON, Jay Leno was an added last minute treat. He entertained the VON troops in old-fashioned USO style. (I'm still trying to live down his comments about my Hawaiian shirt).

The "Voices of Classic Rock" ( http://www.rockforever.com ) played the conference party and the band was excellent. Some of the delegates read the description about the band and thought it would be a local group playing classic rock songs -- they had no idea it was a band made up the actual lead singers from some of the best known classic rock bands of the 70s and 80s.

Special thanks goes to all of the vendors who contributed to the success of our Open Test Network ( http://pulver.com/testnetwork ) in San Jose. In particular, I'd like to extend a very special "Thank You" to Ericsson and OZ.com for all of their behind-the-scene contributions in Melville, NY leading up to Spring 2000 VON. In addition, thanks goes to both Audiotalk and Nuera for their on-site contributions.

I believe the VON industry is finally at a turning point as we are down to talking about the business opportunities with much less questioning of "whether it works." A significant percentage of the audience were buyers, and another significant percentage categorized themselves as "service creators". This is the growth sign I believe everybody has been looking for and is indeed a very positive indicator for the near term future of the space.

Presentations from this conference are now available from: ( http://slides.pulver.com ).

Industry Trends Observed at Spring 2000 VON

1. 2000: Year of the Service Creation Application

During VON I ran into a group of vendors who verified the tools were coming into place this year to enable the creation of the "Personal Central Office". Many of the companies developing service creation tools have SIP based offerings. These companies collectively will be a catalyst for a new wave of "Cool New Services" which will be available later this year.

A sample of some of the companies supporting this space include:
• Broadsoft ( http://www.broadsoft.com )
• dynamicsoft ( http://www.dynamicsoft.com )
• iLink ( http://www.i-link.com )
• iPeria ( http://www.iperia.com )
• Lucent ( http://www.lucent.com )
• Netcentrex ( http://www.netcentrex.net )
• Netergy ( http://www.netergynet.com )
• Pactolus ( http://www.pactolus.com )
• Sylandro ( http://www.sylantro.com )
• Syndeo ( http://www.syndeocorp.com )
• Taqua ( http://www.taqua.com ) •Telecom Tech. ( http://www.telecomtechnologies.com )
• Ubiquity Software ( http://www.ubiquity.net )
• UForce ( http://www.uforce.com )
If you would like to have your company added this list, please visit ( http://pulver.com/gateway/change.html )

2. Protocol Detante

For at least a week this year, it seemed as if the industry was observing a "Protocol Detante". The vendors in the space are starting to realize the VON Industry will be a multi-protocol world.

3. QOS Happened

Overheard in the halls were the discussions QOS already happened in the VON world. ATM works. Quite a number of service providers have already deployed ATM. Over-provisioned ATM Networks seem to be the default Network Design of 2000. While some service providers are waiting for MPLS and DiffServ to be delivered over the next 9-18 months, those who didn't wait deployed ATM and are now servicing the needs of their customers.

4. Be wary of WAP

WAP is a great example of what is possible when the internet and wireless networks converge. This said, WAP is starting to look a lot like the wireless equivalent of the 1996 version of H.323. Look for additional and alternative protocols to emerge which offer WAP like functionality without the WAP like overhead.

5. US$100 per port for low density gateways will be a 2000 Reality

During the past year, a price revolution has been taking place regarding the availability and feature set for a new suite of low density IP Telephony Gateways. Companies like: Komodo Technologies ( http://www.komodo-tech.com ), Mediatrix ( http://www.mediatrix.com ), Netergy ( http://www.netergynet.com ) and Quicknet ( http://www.quicknet.net ) are responsible for making the $100 per port (in high quantity ) low density gateway a 2000 reality. These next generation, low cost end points support a variety of protocols including: H.323, MGCP and SIP. (note: not all of these vendors support all of these protocols at this time.)

6. Jeff's Cool Services have already been invented...

In the past two issues of The Pulver Report I wrote about a couple of new services which I would like to see including my personalized Do Not Disturb (DND) and a Soft Call Waiting services. To date, every new service I have suggested has already been invented based on the emails I have received. In some cases, more than one service provider / equipment vendor have already implemented the service. I will attribute this to great minds thinking alike. (I am still waiting for the opportunity to model these services...)

7. The ASP Services Market is Real

ASP services are starting to look legitimate and not just a way for start ups to protect against sluggish sales.

Jeff Pulver announces Min-X:real-time

Back in October, 1998 when I announced the founding of Min-X.com ( http://www.min-x.com ), "The Minutes Exchange", I was working on the idea of establishing an exchange where Minutes could be traded as a commodity.

I founded The Minutes Exchange to act as the "Market Maker" between parties who are either originating and/or terminating IP Telephony Minutes. The operation of The Minutes Exchange to date has been similar to the "Broker's Brokers" which operate on Wall Street on a "Name Giveup" basis. Translation - while the Bids and Offers of the Minutes listed on our Web based Trading Screens remained Anonymous, we introduce the parties originating and terminating the minutes after the deal is completed.

During the past year and a half this service has evolved into our current Min-X:web-auction service which provides a lead generation referral for Nextgen Telcos looking for partners, Equipment vendors who are introduced to new market entrants as well as a place Clearinghouses to come to find new members. Min-X Dealers have the ability to post bid/offers for a given destination and equipment combination.

Membership in the Min-X:web-auction Exchange has been open to those companies which are interested in having The Minutes Exchange act as a Market Maker, have verified capacity for either originating or terminating minutes and pass the operating standards set by Min-X.com.

In addition to Min-X:web-auction, Min-X.com has been holding Dealing Meetings during the pulver.com VON Conferences. These meetings help facilitate the building of relationships between operators as well as provide an opportunity for Clearinghouses to find new customers.

Since October, 1998 I've watched the growth of clearinghouses and I'm now a believer over the next two years there will be an explosion in the number of clearinghouses established. In my book, as more Tier 1 carrier enter the IP minutes marketplace, they will be setting up their own clearinghouse to originate/terminate their own minutes into.

On March 28th, during my Industry Perspective at Spring 2000 VON, I announced Min-X:real-time. Min-X:real-time is a real-time minutes brokerage service which enables our customers to trade anonymous and autonomously with each other. With the advent of Min-X:real-time, Min-X.com has established first non-facilities based, real-time Electronic Clearing Network (ECN) for telephony.

Min-X:real-time will enable Clearinghouses and Tier 1 carriers to expand their reach into other markets, improve network utilization and maximize network revenues. This service will also provide an auditable network information to establish trusted transactions between multiple parties and establish a benchmark for other financial telecom transactions such as Minute forwards and derivatives contracts.

For more information regarding Min-X.com, please feel free to visit http://min-x.com and/or contact Stu Milberg - stu@pulver.com.

SS7 in the pulver.com Open Test Network

One year after announcing the creation of the Open Test Network (OTN), (see http://pulver.com/testnework ) I'm happy to report we are about to go live with SS7 signaling thanks to GTE and Tekelec.

By having SS7 connectivity in the Open Test Network we believe we can do quite a few things for the industry.

The first will be our ability to host interdomain interoperability events where we have call agents pass ISUP messages back and forth. Another will be the ability for Service Creation Environments to talk with other network elements on the OTN. We would also like to interconnect with other Labs which have outside SS7 connectivity such as MCI Worldcom and CableLabs.

On the mediation / fraud detection front, we can also see the opportunity for mediation devices to collect and detect from the SS7 network as well as the call agent, and would be interested in pursuing discussions about the impact of this kind of capability on event messages.

For more information, please email: carl@pulver.com.

So You Say You Want A Revolution...Al Gore?

When Reed Hundt spoke at Spring 2000 Voice on the Net I asked if he would stay after he spoke and sign a few copies of his book: "You Say You Want a Revolution".

While I will probably have a book review of Reed's book in the next few months, one thing is clear, he is grateful to Al Gore.

In the first few chapters, the man who dreamed of the Internet is cast as a strong advocate for the basic goals set down for the FCC under Reed Hundt's rule. Those who received a copy of the book and take the time to read it may have to review their opinion of the current US Vice President.

Update - Instant Messaging 2000: May 23-25, Boston, MA

To me, Instant Messaging and Presence technologies represent yet another disruptive technology which the telecom industry needs to address and deal with. While service providers still have to solve the dilemma surrounding the costs supporting "free" services like Instant Messaging, they need also be careful not to ignore the activities of those around them or they will risk becoming competitively disadvantaged. Those who read the Pulver Report know I firmly believe these technologies are one of the "killer apps" in the VON space.

Instant Messaging 2000 is the second Instant Messaging event I've developed and the event includes a rich mix of both Internet and Telecom companies. Since the first conference, I have taken the feedback received from Instant Messaging '99, and we'll have a balanced program, however this will STILL NOT be a user forum for AOL Instant Messaging or ICQ.

The IMPP standards will bring a new stage in Instant Messaging, where email clients will outnumber the existing market. When IMPP gets deployed this year in email clients, AOL may find themselves back in the position of not being compatible with the "Internet". In fact, with the implementation of IMPP, it is possible we will see many more Instant Messaging clients than ICQ and AOL within the next 18-24 months. Additionally, the wireless and telecommunications theme (including Multimedia) will continue, because many companies are bringing new products to market for this space.

As a full disclosure, I feel it is needed to state while I invited AOL to participate at this event to share their vision and plans for the future of the Instant Messaging space, to date they have declined my personal invitation. It seems nobody at AOL feels it is necessary for them to talk at Industry events that deals with Instant Messaging. Go figure. (Note to AOL: I still have an Industry Perspective reserved for AOL in the event AOL decides to send a speaker.)

Lotus and Novell who have partnered with AOL will be here, as will the companies who have tried to provide interconnection such as Microsoft, Tribal Voice and FaceTime.

What the AOL executives will be amazed by will be the number of start-ups which have entered the Instant Messaging and Presence Management space and the dynamic business plans and technologies which will be introduced at this conference.

Traditionally the phone network and SS7 circuits have managed a POTS call. Carl Ford has shared with me how often people would suggest to him that he should data mine the phone bills back in his Bell days. These people did not realize Carl couldn't get that close to the Customers' data.

Instant Messaging is a new way to signal the start of a call, and if handled properly, it can be the catalyst for dynamic call services. I'm convinced Instant Messaging will be the key to integrating voice with data and not just putting on at as an overlay to the other with no significant value add (meaning revenue).

Right now in the US we pay an extra charge for operator services on wireless. And then the US operator will connect for free (without necessarily providing the number or completing the call). A service pushing the availability of person instead of transferring me to person is a definite plus in my opinion.

A wireless Instant Messaging service which I would pay for today would be one which allows me to ping somebody's phone and check the person's geographic location. Assuming the obvious privacy issues can be worked out, it would be great if when traveling from NY to Chicago my wife could go to a web site and check if my phone has been turned on and registered with a cell at O'Hare Airport signaling my flight arrived. In addition to physical location, it would be great if the phone reported back the state of the battery so she could see if I had any charge left in my phone.

There are also many times when I just want to ping (not ring) somebody's phone to check the state of the phone when I'm trying to track somebody down. This way, if the person decides not to answer my call or I find my call being diverted into voicemail, I at least know the party I called knowingly directed the behavior of the call. Instant Messaging and Presence technologies are helping to make these kind of services a reality today. I'm looking forward to the idea exchanges and knowledge transfer which will be going on when the Instant Messaging Industry gets together in Boston May 23-25.

If you are involved in the Instant Messaging and Presence space and would like to register to attend Instant Messaging 2000, please visit: (http://pulver.com/im2000/register.html ).