Packet 8 is the name of
the service from 8x8, Inc, a company that has been around since 1987.
In its early days, the focus of 8x8 was the development of multimedia
communications chips. In 1997, they launched a video conference product,
under the ViaTV brand name, that was intended for residential use. Through
acquisitions and continued development of IP technology, they have morphed
into a company that has products for the entire voice and video
over IP food chain.
I had the pleasure of conducting a virtual interview with Mr.
Bryan Martin, CEO and Chairman of Packet 8
last week. I am impressed with the thoroughness of his answers. He makes
some strong points that IP is not just for voice, but
that it will enable a rich suite of applications that
we probably have not even imagined.
If my questions are not quite what you want, then you will have the
opportunity to ask Mr. Martin any question you want at the IP
Video @ Telecom ’04 conference, October 12th and
13th in Las Vegas. On to the interview:
Viodi View:
With all of the VoIP service launches from large well established brands
and with Vonage blazing a trail of 15,000 new subscribers per month,
it seems like this is becoming a game of service branding, which will
require lots of investment on the sales and marketing side. Is 8x8 prepared
to or does it need to compete directly with the AT&Ts, Verizons
and upstarts, like Vonage?
Martin:
Packet8 compares and competes very favorably with AT&T, Verizon
and Vonage’s offerings. We are the only service provider shipping
videophones today, and we are on the only service provider with a virtual
PBX offering for small businesses (Packet8 Virtual Office). On a head-to-head
basis with the providers you mention, I would call your attention to
the following comparisons:
Our partnership with Level(3) and other major carriers
puts us on equal footing with CallVantage, VoiceWing, and the other
big network providers, and all of the VoIP service providers have to
compete through the same last-mile broadband technologies in use today
(DSL/Cable/Wireless). Our strategy is to let the large providers educate
consumers about VoIP, and “ride in their wake” picking off
and converting their customers as they learn about lower priced offerings
with more features like Packet8. At the end of the day, brands like
“AT&T” and “Verizon” have been ripping of
their customers for a long time, and they are continuing to do so by
pricing their “VoIP” offerings at the sky-high prices you
see above.
Viodi View:
It appears as if 8x8, Inc. will sell the underlying technology to enable
voice or video over IP, from the chip and board level to the CPE level
and will even private label the Packet 8 service. In this regard, is
8x8’s vertical integration a strategic advantage and how much
does OEMing play into 8x8’s long-term plans?
Martin:
We are the only VoIP service provider who has developed all of its underlying
technologies, which is why we are able to offer services (videophone,
Packet8 virtual office) that are not available from any other provider
today. It also puts us in control of our own destiny as we are not at
the mercy of technology suppliers, and can rapidly add new features
and functions as the VoIP market matures. We do have an active business
of wholesaling and private labeling the Packet8 service offerings, and
anyone with interest in learning more about our wholesale offerings
should contact Mr. Dan Weirich at 408-727-1885.
Viodi View:
Independent telcos are in a unique position in that they have great
relationships with their customers, they offer broadband and they own
the last mile access. For a telco, what are the advantages of partnering
with Packet 8 versus creating their own service or partnering with some
other entity?
Martin:
The advantages are time-to-market and return on investment. We have
turned up private labeled Packet8 offerings in as little as 30 days
from signing, and our private label customers do not have to spend the
R&D dollars or distract management in integrating disparate 3rd
party softswitch, billing and customer service solutions. Also, 8x8
is widely recognized as one of the leaders in video communications,
so any telco who believes, as we do, that rich media IP communications
for entertainment & communication applications are a part of the
future telecommunications landscape would do well to partner with a
technology company that understands multimedia communications. VoIP
is not going to be just about “voice” for very long.
Viodi View:
Is there a minimum or maximum subscriber count that a telco needs for
a partnering deal with Packet 8 to make sense?
Martin:
No, though our most aggressive prospects right now are the “tier-2”
and “tier-3” service providers who today typically have
between 50,000 and 500,000 broadband subscribers. These service providers
want to start marketing a VoIP and video telephony solution to these
broadband customers.
Viodi View:
One apparent differentiator for 8x8, is its work with IP video phones.
Comcast has given indications that, 40 years after the first video phones
were displayed, a market might finally be developing for this service.
WorldGate’s Oja phone may be further evidence of the impending
market for video telephony. As a battle scarred veteran of residential
video phones, where does 8x8 see residential and business video telephony
going in the next few years?
Martin:
We believe that our DV326 offering solves the 3 main reasons that residential
video telephony has never caught on:
- - the video quality has never lived up to consumers’ “Star
Trek”/”Jetsons” expectations, and with broadband,
that is no longer the case;
- - price, and we are now offering in retail two broadband videophones
for $500 (after rebate);
- - the ease of use of the device. Because our DV326 videophone is
built on top of the Packet8 telephony service, your videophone now
works like a regular telephone. It has dialtone, it has caller ID,
it has voicemail. And when you call another videophone, you instantly
get connected with a high-speed video connection (just like Star Trek!).
I cannot tell you how many times I have watched business videoconferencing
users walk into a conference room, pick up the remote control, and
look at each other with puzzled looks because no one knows how to
start the videoconference. Our new phone is simple enough that my
4 year-old can use it, and more importantly, my 4 year-old’s
grandmother knows how to use it.
As for the future of video telephony, now that we have solved the 3
main detractors of basic, point-to-point video communications anywhere
in the world, now we have a platform to really make some application
advancements and start to show people why IP-based communications will
forever change the way people communicate. Stay tuned!
Viodi View:
The Packet 8 service agreement clearly states that the service is not
a primary line service which makes sense because, as a non-facilities
based provider, it would be very difficult to provide primary line service
with today’s network configuration. Is the inability to offer
VoIP as a primary line a long-term growth inhibitor for non-facilities
based VoIP providers?
Martin:
No, as I believe that all voice and rich media communications will be
carried over IP in the not-too-distant future. The biggest growth inhibitor
to VoIP providers today is broadband penetration – you can only
use our services where an always-on Internet connection is available.
Viodi View:
No need to answer these next two questions, as they probably veer way
too far into the regulatory world for the Viodi View, but 1) does Packet
8 consider its service an information or telecommunications service
and 2) why does Packet 8 charge the Federal Excise tax of 3%?
Based on the FCC’s definition of, “It [the excise tax]
is imposed on all telecommunications services, including local, long
distance and wireless bills”, it would seem that by charging
this tax, Packet 8 is validating that this is a telecommunications
and not an information service.
Martin:
We consider ourselves an information service, though we have always
collected FET under the advice of our tax attorneys (just as Internet
service providers, who are also information services under current rules,
collect this tax). A recent IRS
notice confirms that we are doing the right thing by adding
the FET tax to our subscribers’ bills.
Product Questions:
Viodi View:
Does Packet have soft-phone capability, so that a PC can be used to
make phone calls on the Packet 8 network? This could be real handy when
traveling.
Martin:
We do not offer a Packet8 soft-phone, though our subscribers who need
one can utilize our interconnection agreement with Free World Dialup
(FWD), download their soft phone, and use the Packet8 call forwarding
feature to forward calls to and from the softphone to regular PSTN numbers.
I use this feature regularly (both in my office on our 802.11 network
and when traveling).
Viodi View:
Does Packet 8 have any plans to come out with a device with an input
and output Ethernet connection that would go between the DSL or cable
modem and the router? Further, could such a device do some sort of traffic
prioritization such that VoIP traffic was given priority?
Martin:
We are shipping such a device today with our Packet8 Virtual Office
product offering, since a lot of small business users who install our
business PBX product may not have the flexibility to add additional
Ethernet drops in an office environment. We find that our residential
users have no objections to using an existing or new home router with
Packet8, and have not included a built-in router function in those devices.
Viodi View:
Any plans on adding some sort of battery back-up to the terminal adaptor?
I realize that this is probably a moot point, as the real issue is that
back up power needs to be applied to the DSL modem as well. So, that
leads to the next question, are there any plans to have a terminal adaptor
integrated into a DSL or Cable Modem, with battery back-up, etc.?
Martin:
Customers who require that level of redundancy just use a standard UPS
system. To be clear, thought, the vast majority of our customers just
use the cell phone in their pocket if the power ever goes out.
Viodi View:
Given the same DSL line and the same network configuration, will there
be any quality difference between the $19.95 per month residential service
and the $34.95 business service?
Martin:
The quality is identical. The difference in price is simply a reflection
of our costs since our business customers tend to use more average minutes
per line than our residential customers. Note that we do not increase
the per-minute rates of our international tariffs for our business customers
over what a residential customer pays (unlike some of our favorite competitors!).
So a Virtual Office customer pays $39.95/month/extension for unlimited
US and Canada calls, and $0.02/minute for calls to the UK or China (the
same per-minute rate that we offer to our residential customers).
Viodi View:
Is it possible to have voicemail appear as an email? It seems like this
is available only as part of the Virtual Office Plan.
Martin:
This feature is standard on all voicemails in Packet8 Virtual Office.
In the residential service, there is an option in the voicemail IVR
to send a voice message to your e-mail, but you have to manually do
this for each message you want sent to e-mail. It is not automatic in
the $19.95/month plan.
Viodi View:
When will Fax capabilities be available?
Martin:
Best efforts FAXing is available today with our latest endpoint firmware
upgrade (see http://web.packet8.net/download/1239_changelog.html). “Best
efforts” means that if data packets are lost, your FAX may not
go through as the FAX is being carried over an uncompressed G.711 audio
channel. We will be supporting reliable, T.38-based FAX (which uses
TCP/IP encapsulation) in the near future.
Viodi View:
When faxes are supported, will modems also be supported? I note that
Direct TV and TIVO still need modem capability in order to poll the
boxes to get ordering information, etc.
Martin:
We are working on the TIVO issue as we speak, as this is one of the
most requested needs of our residential customer. As a TIVO user myself,
I understand the urgency to support these types of modem connections.
Viodi View:
When will directory services be available?
Martin:
We will be supporting 411 services in the near future.
Viodi View:
When will incoming toll free calling be available?
Martin:
We will have a 1-800 toll free offering in the near future.
Viodi View:
Where are the Packet 8 gateways and what IP backbone does Packet 8 use
for the VoIP service?
Martin:
We have two datacenters (one is a hot backup of the other) in use today
(one is in Sunnyvale, CA, the other in San Jose, CA) and are providing
worldwide telephone service out of just these two locations.
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