Voice of a new generation

Armed with new funding, TalkingNets aims to redefine telephony TalkingNets turned up commercial service in the first two of 25 planned cities last week, activating a network that many observers believe represents a new norm for voice delivery over packet networks.

The launches in Denver and Cleveland mark the premiere of the company's wholesale telephony application service provider (ASP) model, which employs a softswitch network to deliver carrier-class voice-over-IP applications to data services providers (Telephony, Oct. 2, page 48). Interfold, an ISP in Denver, and Next Wave Resources, a building local exchange carrier (BLEC) in Cleveland, are the first channel partners for TalkingNets.

TalkingNets principals believe the company's approach is the best solution for traditional data service providers that want to add voice to their portfolios but face several constraints - including regulatory hurdles, lack of in-house telephony expertise and capital limitations.

"Because they can't go out and raise additional money to add voice, they see us as a good solution to add voice to their portfolio," said Tony Surak, executive vice president of sales and marketing for TalkingNets."We address the small business that traditional Class 5 CLECs have really ignored. Other service providers are looking for other offerings to sell these guys, so they'll be looking to us as the complete voice services provider."

Indeed, both TalkingNets' new channel partners and industry analysts see economic value, time-to-market advantages and hassle reduction in tapping into an ASP source for voice.

"For us to do what TalkingNets is doing, we'd have to file for CLEC status and buy a million dollars worth of equipment, and that's only for local service," said John Moore, president of Interfold. "Then we'd have to strike deals with long-distance carriers. By the time we got service to the client, they wouldn't be saving any money."

TalkingNets' services represent a fast solution for data-focused providers, said Tom Jenkins, director of consulting for TeleChoice. "It's certainly an opportunity for a company that has historically been data-focused to enter the voice marketplace," Jenkins said. "They realize that to increase revenue and reduce churn they need to add voice options, and most of the data services companies have no voice marketing expertise."

Providers of capital also appear to be enamored with TalkingNets' plans. The company closed its second round of funding last week, garnering an additional $20 million and attracting venture capital firm Charles River Ventures as a new lead investor. Ven-rock Associates, which led TalkingNets' first funding round, also participated in the second, as did TriTech Partners and Hatch Group. In the current capital market, that level of endorsement is rare, Surak said.

"It's a tough fund-raising environment, and only plans that have gone through a lot of scrutiny and show a viable financial model are getting funding," he said. "The feedback [Charles River] gave us is that they're a believer in the emergence of the IP-oriented phone network. They like the fact that we have a full team in place and the progress we've made over the past year."

The idea that data services providers are somewhat desperate to enter the voice game, however, begs the question of whether they're turning to TalkingNets because its offering is the best option available or because it's the only option available. TalkingNets is confident the toll quality of its applications and the current and future enhanced services that will be available - including virtual PBX functions, voice mail, caller ID, unified messaging and other features - make it the most logical choice.

"It's becoming clearer every day that the approach we're taking is the best way," Surak said.

Another industry analyst agreed, saying the ASP model for IP-based voice that TalkingNets is employing potentially marks the beginning of a new trend.

"My thinking on TalkingNets is that they could turn out to be the first implementation of a brand new way of doing things," said Greg Mycio, an analyst at New Paradigm Resources Group.