Betting on the future

A recent survey by The Phillips Group found that 20% of companies with multiple locations are testing IP telephony over their local networks. By the end of 2000, almost half of U.S. companies will have some kind of formal implementation of IP calling, the survey says.

The preponderance of these multisite companies likely will go with large, established IP carriers such as deltathree.com, Level 3 Communications, Sprint and AT&T. But some smaller IP voice carriers have identified a niche opportunity in the business market - small and medium-sized companies and home offices.

PowerNet Global is one such aspiring player. The company will launch the first portion of its IP voice network in February, offering long-distance and Internet access in Atlanta, Dallas, Cincinnati and Los Angeles, and will bring up New York, Chicago and San Francisco in March and April. Eventually, PowerNet Global hopes to add local voice over DSL to its service menu.

The company started reselling long-distance and data service from interexchange carriers such as Qwest Communications in 1992 under the name PNG Telecommunications. "Then we decided that the world was going packet, and we had to get on that train," said Bernie Stevens, president and co-founder. About two years ago, when IP voice quality began to improve, Stevens asked consultant Todd Pfister of The Lumley Group to help him draw a business plan for IP telephony. The plan was drawn and Pfister was drawn into the business where he now is PowerNet Global's chief operating officer.

That plan involves targeting small and medium-sized businesses and small office/home office (SOHO) users in selected cities for a package of integrated communications services delivered over a packet network leased from Qwest and Global Crossing. PowerNet Global's capital costs will be "in the $3 million to $4 million range" by the time all 14 points of presence (POPs) are in place, Pfister said.

The network will deploy Cisco Systems' open programmable switches that run voice application software from SynapSys. These, combined with Cisco gateways and routers, will enable PowerNet Global to offer enhanced calling services such as conference calling, 800 numbers with PINs, calling cards and unified messaging functions.

SynapSys also provides an interactive voice recognition platform that will allow PowerNet Global to bring new services to market quickly. "Basically, we've given them a [graphical user interface] scripting environment that allows them to lay out new call flows by drag-and-drop and make attachments between different actions," said Brad Pitt, SynapSys' executive vice president of sales and marketing

"Unified messaging is still in its infancy," Stevens said, "but we see it becoming a critical offering in 2000. A lot of small businesses have salespeople on the road constantly; they need that communications link."

Selling IP services to small businesses means selling short and long-term savings. "We tell them that multiple voice channels over DSL are coming to eliminate their $50 to $60 per-line phone charges and bring them inexpensive local service," Stevens said. "In the meantime, long-distance savings can pay for all the connectivity they're going to need."

PowerNet claims it can save the average small business more than $1000 per month on a typical $2000 monthly long-distance bill. SOHOs can save 40% to 50% off long-distance, but for them, the incentive is the prospect of faster Internet access over DSL and eliminating charges for a second phone line for the PC.

PowerNet Global isn't concerned that it's staking so much on the roll-out of future technologies such as voice over DSL. After all, betting on the future is what has allowed them to put the network together.

"If you tried to put DMS 500 switches in 14 POPs - which was all you could do three years ago - you're looking at a $40 million network," Stevens said. "Three years ago a solution like this would have cost a small business $10,000 a month. Programmable switches and IP technology in general have made this possible, and it's amazing."