More on ITXC
Ok, my friend's company is going public today (6.25 million shares @$12; underwritten by Lehman, CIBC, and First Analysis Securities; Nasdaq symbol ITXC), and as promised here is a more detailed presentation of what it does. PLEASE bear in mind that I know squat about this whole area, and am offering the following MERELY IN HOPES OF PIQUING THE INTEREST OF SOMEONE BETTER EQUIPPED TO EVALUATE IT SERIOUSLY. Comments/critiques/questions welcome, as this is a learning experience for me as well as an investment opportunity. This is not a gorilla game, although in the best-case scenario it might become a royalty game. Right now the company strikes me as a tiny shiny pebble. --tekboy
THE MARKET
Telephony based on internet protocols emerged in 1995, with the invention of a program allowing the transport of voice communications over the internet via a microphone connected to a personal computer. But sound quality was poor and the service required both parties to use pc's instead of telephones. This latter problem was solved in 1996 with the advent of the gateway, which enabled calls to start and end on telephones while traveling over the internet in between.
Long distance telephone calls transported over the internet are less expensive than similar calls carried over the traditional telephone network because the cost of using the internet is not determined by the distance those calls need to travel. Also, routing calls over the internet is more cost-effective than routing calls over the traditional telephone network because the technology that enables internet telephony is more efficient than traditional telephone network technology. In addition to lower costs, moreover, intenet telephony should also produce greater functionality, thanks to its superior ability to provide enbanced services such as audio conferencing, voice mail, messaging, and so forth. Some believe this market is potentially larger than the market for any other existing internet service requiring a computer for access.
To date, the growth of internet telephony has been limited because of poor sound quality caused by technical issues such as delays in packet transmission and bandwidth limitations. But the addition of data network infrastructure and various technological developments are eliminating these problems, and the International Data Corporation projects that internet protocol telephony revenue will grow rapidly to over $23 billion by 2003.
THE PROBLEM
Although several large long distance carriers including AT&T and Sprint have announced internet telephony service offerings, traditional carriers have substantial investments in traditional telephone network technology and have been slow to embrace communications solutions that would hasten its obsolescence. The current service offerings by large long distance carriers, along with those by smaller internet telephony service providers, are generally available only in limited geographic areas and can only complete calls to a limited number of locations.
Moreover, the infrastructure required for a global IP telephony network is too expensive for most companies to deploy on their own, which means that a functioning network must involve a combination of gateways owned by different operators. To achieve optimal functionality, however, the gateways need to be able to communicate with one another, which in turn requires the development of uniform standards for vendors and manufacturers of internet telephony equipment and software.
THE ITXC SOLUTION
In order to deliver high quality voice communications while drawing on the cost savings, global reach, and eventual greater functionality of the internet, ITXC has developed and deployed ITXC.net, an actively managed network overlayed on the public internet. The company has established ITXC-owned facilities in the U.S. and has arranged call termination and origination services with affiliates throughout the world. It has used its affiliate structure to achieve the broadest global network in the internet telephony marketplace, and on a typical day carries voice traffic from over 30 countries to more than 140 countries. By using the internet for transport and its affiliates' local infrastructure for terminating voice traffic, the company has developed a reliable network which it is expanding rapidly at lower capital expense than traditional carrier networks. By the quarter ending June 30, 1999, voice traffic carried over ITXC.net had increased to about 25 million minutes.
The rapid growth of commercial traffic on ITXC.net demonstrates that the company can deliver high quality, low cost voice and fax communications over the internet and is well positioned to deliver enhanced voice services. The key advantages of the ITXC solution include:
high quality (achieved using its proprietary BestValue Routing technology and techniques, which include ITXC-developed monitoring and analysis software and rapid human response);
low costs (achieved by using the internet);
interoperability (achieved by promoting the iNOW! effort to develop guidelines for interoperability among multiple vendors);
global scale (achieved by using its easily scalable affiliate structure); and
easy access (achieved by offering connection to ITXC.net through either normal dedicated connections or through SNARCs, which are specially built gateways installed on customer premises).
The company currently has strategic carrier relationships with Bell Atlantic, China Telecom, and Korea Telecom, which provide expanded global reach for ITXC.net and termination points in locations which are significant for its customers. Because gateways are critical to ITXC.net's infrastructure, the company also has strategic relationships with Lucent and VocalTec, both leading gateway manufacturers.
Since its founding in July 1997, the company has concentrated on developing its relationships with affiliates and customers; developing its proprietary technologies; deploying and managing its network; and increasing traffic. The company's goal for the future is to become the leading provider of internet-based voice and fax services, eventually including: enhanced phone-to-phone service; pc-to-phone and phone-to-pc service; device-to-phone and phone-to-device service; unified messaging service; voice-enhanced e-commerce; and single number service.
Proprietary rights are important to the company's success, and as of July 31, 1999, it had four pending applications for trademarks in the US and 15 pending aplications for trademarks in other parts of the world. It also has applied for one patent in the US for its network monitoring and management techniques.
SENIOR MANAGEMENT
Chairman, CEO, and President Tom Evslin founded ITXC in July 1997. From December 1994 to July 1997 he worked for AT&T, where he designed its internet strategy and launched and ran its internet service provider, AT&T WorldNet Service. From December 1991 until December 1994 he worked for Microsoft, where he last served as general manager of the Server Applications Division.
Executive VP and COO John Musci joined ITXC in Feburary 1999. From June 1998 to February 1999 he served as Senior VP of Wholesale Switched Services at Qwest Communications International, and before that held various positions since 1985 at LCI International, a long distance telecommunications company, until it was acquired by Qwest in July 1998.
Executive VP and CFO Edward Jordan joined ITXC in September 1997. From 1987 to 1997 he was employed by Dialogic Corporation, a manager of computer telephony products, first as Controller and then as CFO.
COMPETITION
Competition for ITXC will come from like competitors (i.e., other internet telephony companies) as well as substitutes (i.e., traditional PSTNs, public switched telephone networks).
Like competitors include AT&T Global Clearinghouse, GRIC Communications, and iBasis Inc. They all route traffic to destinations worldwide and compete directly with ITXC. But as noted above, AT&T has a vested interest in not contributing to the obsolescence of traditional telephone networks. GRIC is still privately held; it has good technology, but little traffic to date, and its exclusivity approach vis-…-vis customers is probably a mistake. iBasis is also still private, although it has filed to go public. From what I gather, ITXC is ahead of the game at this point and is well positioned to retain market leadership status based on its reliability, quality, pricing, and services, but it will need to continue to expand and execute furiously in order to do so.
For those interested, more information is available at www.itxc.com |
