In the spotlight: 8x8’s Huw Rees

SunRocket’s well-documented financial collapse and Vonage’s continued financial and legal problems have cast a long shadow over the pure-play VoIP market. Huw Rees, vice president of marketing and sales at 8x8, which operates the Packet8 VoIP service, spoke to Editor-in-Chief Carol Wilson about his company’s prospects.

On general negativity about pure-play VoIP: Things aren’t that negative. There are some specific situations that obviously affected SunRocket and Vonage but are not necessarily affecting us. We are a publicly traded company, and you can see that over the last year or so, our operating losses have been reducing, our cash burned has been reduced substantially. In the last quarter, we reported $492,000, which is pretty darn close to break-even. Those were March 31 results; we haven’t reported the June 30 results yet.

On what makes 8x8 different: We are focused more on business, and we live and die a little less on consumer sales. These are higher-margin accounts for us, so we are able to get a better-quality subscriber in terms of profitability. We didn’t abandon consumers, but we decided not to compete with nonsensical offers. SunRocket was offering $199 for two years of service as a special offer. We know the cost associated with this business –there is no way you can make any money on that. It is a money-losing proposition, and we weren’t able to match that. But in general, we feel very bullish about the whole space and about our prospects.

On cable’s entry into the SMB space: I’m sure we will see them competing here. But this is a different type of space. One of the things that helps us – cable companies don’t pass the small businesses. Their networks often don’t necessarily pass the business locations so their ability to compete is not quite as strong. There is no doubt that given their capitalization and ability to spend, they could muscle way into the market. But this is a huge market – there are more than 20 million small businesses in U.S. We have a nice head start; we should be able to sign up businesses at a rate that is either steady or accelerating. The overall perception of small businesses right now is that VoIP is way to go in terms of controlling overall costs.

On fears that others’ problems could tarnish 8x8: We would be concerned if the FCC decided for any reason that it needed to regulate VoIP. But I think we are not quite as concerned ourselves, as a publicly traded company. If businesses are concerned about us, they can look our financials and determine for themselves how relatively strong we are.

On controlling customer acquisition costs: That’s a good question. We certainly saw SunRocket’s nonsensical offer, and Vonage acquisition costs out of control. We consistently had customer acquisition costs between $120 and $130 – that’s a reasonable and sustainable customer acquisitoin cost. The way we have done that is we have focused our marketing at customer acquisition and direct return on investment as opposed to focusing on brand building. We don’t do TV ads. We use marketing where we see direct return and we measure those returns very carefully. It’s part of my job to cut campaigns that don’t perform well and boost campaigns that do.