May 30, 2007 12:31 PM PDT

Telcos' evolving response to Net phone services

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"We're very telco-friendly," said Trevor Healy, CEO of Jajah. "We recognize that the phone companies make money from renting their traditional lines, and our service does nothing to take that away from them."

That argument was enough to convince Deutsche Telekom's investment arm, T-Venture Holding.

"Jajah is not a threat, because the user still requires a landline or mobile subscription to use Jajah," said Georg Schwegler, CEO of T-Venture Holding. "There remains a certain cannibalization effect for a few use cases, but overall the global approach and the geographical distribution of Jajah business plus the attractive synergy potentials outweigh the threat potential by far."

Not just about cheap calls
Other companies have come up with similar services that marry IP with the phone company's existing phone network. A company called Jangl allows people to make low-cost VoIP phone calls from cell phones or regular phones. The service, which allows for anonymous calling, has been developed for people using social-networking sites. It assigns local phone numbers that can then be associated with a particular e-mail address or user name, and calls can be initiated simply by clicking a name. The technology is already being used by the dating Web site

Jajah and Jangl allow consumers to make cheap international calls without buying extra equipment or downloading software. But cheap international calling won't be the killer application forever, Stofega notes. Instead, VoIP companies will have to leverage their software more broadly so that it's used to connect other parts of the communication network.

"The mistake that Vonage made is that it got too caught up in becoming a phone replacement service," Stofega said. "Then they got bogged down in requirements like E-911 (for calls made to local emergency services), and they haven't really innovated in two or three years."

Stofega added that the real value in the new generation of VoIP companies is their software, which can be embedded into desktop applications or into mobile devices themselves. He explained that what is needed today is a universal communications client that sits in a device or on a desktop and ties together all the phone, instant messaging and e-mail functionality into a single client across all platforms. The technology, which would be embedded in the actual devices, would be intelligent enough to know where to find you, regardless of which device you're using.

Jajah's strategic partnership with Intel Capital appears to be a step in this direction. Intel is also an investor in Jajah's latest round of funding. Putting VoIP software on chips could link all kinds of consumer electronic devices to an intelligent communications network.

"Making cheap phone calls is just one application," Healy said. "Embedding our software across platforms to interconnect the communications network is the bigger picture."

But start-ups aren't the only companies dreaming up new applications for VoIP. Google and Yahoo are also doing a lot of work with voice, especially in voice-based search. Stofega believes this work could open up a whole new array of applications, such as allowing avatars to act as surrogates for people doing things like scheduling dentist appointments.

While it's clear that Deutsche Telekom sees the value in the next generation of VoIP companies, Stofega said that U.S. operators may not be as receptive. Even though Verizon and AT&T each offer their own flavor of a VoIP service, they have not spent much money or effort marketing the services.

"Historically, phone companies don't like to open up their networks," Stofega said. "Right now they're battling cable companies and their own landline loss. And when it comes to new applications they want to develop them and own them."

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Deutsche Telekom AG, Internet phone, VoIP, Vonage Holdings Corp., telephone company

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I saved about $78 per month by moving to voip!
It's about time the Telcos start waking up. I did an experiment and moved our home phone to VOIP.... saved heaps of Money.

Here's a link to the actual phone bill data:<a class="jive-link-external" href="" target="_newWindow"></a>

Additionally, we use Skype a lot at home to call other folk with Skype for free.

Hoping the a phone becomes a commodity soon and the Telcos start selling us something else that's valuable.
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