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Transcript of Al Niven's presentation at the
VOICE ON THE NET (FALL 99)
on the topic of VOIP for the Rest of the World.

AL NIVEN:

Welcome everybody to this session VOIP for the Rest of the World. And I guess that's a nice way of saying voice over IP in the developing world.

My name is Allen Niven. I'm moderating the session. We have five speakers today. We have a lot of speakers, so I'm going to limit everybody to ten minutes, and then I think we should do a question and answer session after everybody finishes speaking, and then you can just direct your question to the individuals on the podium. I think that will be more efficient if you can address questions to people as a group. And one person may answer a question in a later presentation.

Just by introduction, at GlobalNet Telecom we originate voice over IP and fax over IP from developing countries. We are a service provider with an emphasis on developing countries.

As the moderator I'm going to make a very short five-minute introduction, and I have spoken on stage at these shows for the past three years and I've always spoken without notes or visual presentations. But this time I made a decision to preach and not to pitch. So I'm going to be actually reading from a prepared presentation.

Before I start it occurred to me that some people here might not be familiar with the concept of settlement rates. So before I start at the risk of boring anybody here let me define the term settlement rate. Well, the question is how come it costs, let's say, five cents to call the United Kingdom and let's say 70 cents to call Pakistan.

And the answer is, is that the PTT, the government-run monopoly picks a number which is, in my opinion, not related to free market supply and demand economics, and they say okay, if you want to terminate a call in my country you've got to pay me 50 cents. And that's the settlement rate.

Now a bilateral settlement rate is an agreement between two PTT's where they agree on a settlement rate and they endeavor to have traffic exchange with each other so there is no cash exchange; it's a wash, it's an even exchange.

And as a result of these government to government bilateral agreements, otherwise known as settlement rates, very often the population in that country suffers because the PTT will say gee, I don't want to increase originations out of my country to this other country because if I do I'm going to have to pay cash, so instead, we're going to keep things the way they are and keep a lid on it and you have a situation where the actual phone traffic that would normally originate out of a country in a true free market environment is artificially suppressed.

So with that as an introduction, let me give a five-minute prepared presentation. Then we'll switch over to the speakers, 10 minutes each, and then we'll have a question and answer session.

Recently, I attended a venture capital conference where billions of dollars were flying around. And the discussion centered on how successful brick and mortar companies like Schwab had made the successful and profitable move to an Internet economy, and also about the hard cash gains in productivity that the Internet brings.

When I came home from the conference I saw a magazine. I receive a subscription for this magazine from a developing country, and I will not say which country. And on the front cover of this magazine was a headline "Why do corporations need the Internet"?

And I felt very sad for this country, and at that point I decided that in my presentation today I would preach rather than pitch.

And I am going to speak about governments, about government PTT monopolies and technology. But I want to make it very clear from the outset that I do not admire any government over any other government.

If I sound cynical it is because recently the President of the PTT of a forever-to-remain un-named country came to visit me in my office in the Empire State Building in New York.

Okay, so the President of the PTT comes to visit me in my office. And I don't want to say which country. This particular man wanted his company to get involved in the calling card business in the United States and he wanted to get involved in originations from the United States. And that part of the conversation went very well.

Then I asked him how could I help him increase his international originations from his country. And he said he was not interested in increasing the international originating traffic from his country. Not interested.

Why? Because...and he told me this pointblank...it would upset his settlement balance with other countries. Then I asked him, how about voice over IP and, all these other technologies that could create efficiencies for originating international traffic.

And again, he said he was not interested for the same reason. He has one interest, which was to maximize his terminations so he could collect his 35-cent per minute settlement fee.

So that was the communication of the President of this particular PTT.

Isn't this outrageous? Isn't this crazy? Can you imagine the CEO of any private sector company saying that he is not interested in new markets or new revenues?

In that same magazine there was an interview with the CEO of another PTT, another country's PTT. And, again, I don't want to say which country it is. I'm not going to name the country. I will say that the country has a phone penetration of about two percent.

Now in that interview, the CEO of this PTT claimed that his company was the technology leader in telecom services. What he did not say was that his company was the only technology company in telecom services.

He then went on to say that, unfortunately--surprise, surprise--the delivery of new technology takes time. And he did not say when or how or why or what the results would be or when the new technology would be delivered.

Now, what makes it very poignant about this particular country was that in that country in 1994 and 1995 a telecom act was proclaimed declaring the goal of universal telecom services for all the people in that country.

However, that country issued cellular license fees to six companies in that country, and the fees were so exorbitant that the fees took up about 60 percent of the project costs. Two of the companies could not pay the fees. So the country cut off the service of 100,000 cellular subscribers.

Some of those cellular subscribers lived in a part of the country that had no phone service whatsoever.

Charging exorbitant license fees which, in fact, inhibits rather than encourages telecom service is dysfunctional. To see how dysfunctional it is let us compare that country's experience with the experience of Finland which privatized in the mid-1990's.

Three years after privatization each of the two companies that exists now have greater revenues and are more profitable than the state-run PTT ever was. Competition forced innovation which created new services which increased the volume.

If you don't believe me, you can read the article titled, "The Nordic Track" which appeared in a magazine called Tele Dot Com, www.TeleDotComDotCom. And it describes the experience of the successful privatization in Finland.

To turn full circle to the point of view of the dysfunctional government, I would guess, and this is only a guess, that the increased commerce that resulted in Finland probably resulted in more tax collection for the government.

So the lesson is simple. Competition results in innovation, which results in abundance, and with abundance everybody wins.

I am relating this story in case any of you are questioned by a card-carrying PTT employee. And you probably know the type. He went to a state-run school, he wanted to have a state-run job, and now he has the self-important air of a state employee.

I humorously suggest that you tell that person that you now have a new religion, a new mantra, a new creed, namely higher consciousness through higher technology.

And I'm not using the term higher consciousness through higher technology as merely a humorous play on words. When governments ask for new technology they almost always couch their request in terms of modernization or upgrade.

They want the new technology but they do not want the openness necessary to create new technology. They want the new technology but they do not want the freedom necessary to create new technology. It is like darkness asking for light but at the same time wanting to remain dark. It cannot be. Light does its thing, and it gives light to everything, and it cannot be stopped.

In all spiritual traditions the Divine is depicted as a seducer, as that which draws all things to itself. For example, in one spiritual tradition the divine is pictured as playing the flute and it attracts pretty ladies to itself. And in another spiritual tradition the author writes of an ocean of love which has drawn him in totally and ecstatically.

Perhaps technology is also a seducer in the same way, drawing things and governments out of the darkness of closedness, prejudice and fear and into the light of openness, sharing and abundance.

And of all the bright and attractive technologies bringing the darkness into the light, perhaps voice over the Internet is the brightest and most attractive of all. Thank you.

[APPLAUSE]

[CUT, END OF TRANSCRIPT]

*****

Transcript of Al Niven's presentation at the
LATIN AMERICA 99 WORLD CONGRESS

January 20-21, Miami, Florida

 

Hi, my name is Al Niven.

I want to address the last question before I go into my speech here, since it is good lead-in.

The question just asked was voice over public Internet versus voice over private line frame relay.

GlobalNet is based in New York. I happen to know the presidents of many of the carriers and calling card companies.

Now, one of the things these carriers do--all these carriers--and please tell me if any of these names ring a bell...PT-1, PT-I--yes, you know that? Pacific Gateway Exchange, EconoPhone? You know -- all these guys are at 60 Hudson Street, which is a telehouse in New York and they all sell the calling cards in the newsstands on the streets of New York. And they're also carriers.

Now, one of the things these guys do is--they go to John Doe in XYZ country and they say hey, we'd like to put a private line there because we want to reduce the cost of the rate from USA to that country. So, they put a private line in there and then they obviously have a choice. Do they want to do IP or frame or what?

Almost always they use a traditional MUX, like RAD, which is a very popular one or MICOM. They get a 12 to 1 compression and they have 360 phone calls over on E-1.

If one is going point-to-point, that's usually what to do in order to reduce the rates. So that, I guess, would be an argument against voice over IP.

If you log onto our site you'll see that mostly in third world countries. Everything we do is over public Internet, period. And one of the ways we get around some of the limitations of going over public Internet is that we--basically have a rule that says--the third world originates and first world terminates.

And that's an economic thing as well as a bandwidth issue. So, for example--let me give you a really good example. We have a guy in Tanzania that's originating voice over IP from Tanzania. He's an ISP there. He's making money. And he's got a ping time of 800 milliseconds and the voice quality is absolutely excellent.

And what happens is that he can originate from there, but we don't even attempt to pump calls in there. And I think the PTT there charges 5-dollars a minute. He's charging a dollar a minute. He's making really good money and he's a happy camper.

So, if you do it intelligently, you can stick to the public Internet, which is what we do, and just follow that rule where third world originates first world terminates.

I want to make one more point about these private line issues--the RAD MUX on ATM or frame vs. IP.

One of the things that you'll discover in this industry is a lot of hype. And one of the things that kind of rubs me the wrong way is you'll see a lot of these companies say--well, we're doing 2-million minutes a month, 3-million minutes a month, and we're doing mostly termination.

The guy that claims to be NextGen Telco, that claims to be an ITSP--what he simply does is he goes to those carriers in New York that are selling these calling cards--whether it's EconoPhone or PT-1 or whatever--and says--look, I can get you a way to terminate in XYZ country and you can lower your rate.

So, if you go down to 60 Hudson and you go into the office of PT-1, he will show you, here's an IDT box, here's a Delta-3 box, here's a whatever. So, when the end user buys his calling card from the newsstand he calls that 800 number, it comes into the regular switch, gets handed off to the VOIP switch and off it goes to that country.

To me, that's not VOIP minutes. For me, VOIP minutes is node to node, meaning let's say from Tanzania to Johannesburg. But to say that the traffic that you brokered from carriers of calling card companies in the United States and you're terminating this to John Doe in XYZ country...this is not VOIP minutes...its a brokering deal.

I don't broker. One of the ways we do business--actually, the purpose of my speech today is business models.... is a really unique business model that we innovated.

We are very interested in origination from 3rd world. The limitation on origination from third world is bandwidth. So, I don't care about the guy in Tanzania getting a commission on minutes terminating from the USA...i.e. "we'll bring you a million minutes a month and here's a couple of pennies per minute and you make some money."

Instead we take our commission as a partition on the bandwidth. Forget the money. If you're going to put an E-1 into Tanzania, give us 256, so that we can now originate, back out from Tanzania to the rest of the world. So, this is a 3-way win situation.

The guy in Tanzania's much happier because he's going to make 5 times as much money on the origination from Tanzania as he would making the termination. I'm happy because I'm the clearinghouse; I'm the bank. So, every time he originates from Tanzania, I'm making money also. This is a win-win-win situation.... the carrier, the guy overseas and the clearinghouse.

Ok so much for the introduction!

My name is Al Niven. We're headquartered in New York. We're a NextGen Telco ITSP. Before I speak further, I'd like to ask--how many people here are PTTs? Okay. And how many people here are ISPs? How many people here are ISPs that are not PTTs? [LAUGHTER]

Okay--just want to know who my clientele is here. All right. Cause a lot of the things we do in third world countries is under the radar. So--[LAUGHTER]--I'm not sure I'm going to speak about that. But at any rate, I'm here today to speak about business models and the business model is key. I mean, you're going to have presentations from many "next generation" telephone companies, and the question is the business model. And there are many, many, many business models.

Now, before I even get into the business models, people here, if you're from the States, might recall 3 years ago, 4 years ago, people were saying there's going to be a consolidation, a shakeout in the ISP business. Meaning, the number of ISPs is going to get smaller.

They said this 4 years ago. They said this 3 years ago. They said this 2 years ago. They said this last year. The number of ISPs in the United States is still rising, the number of ISPs in the world is still rising. How come there's no shakeout? How come there's no consolidation? I mean, there now must be 5,000 ISPs in the United States.

An analogous situation is happening in the voice over IP business. There are now, at my last count, 150 ITSPs--Internet Telephony Service Providers in the world. 150. 150 NextGen Telcos.

Now, I've put together a list of these NextGen Telcos--the URLs--the websites. And you can click, click, click, for two weeks. You can click through all these NextGen Telcos. I could have made a slide or I could have put it in the conference book, but it's a lot better for you if you drop me an e-mail and I hit reply and I send you a list of URLs, because when you get a list of URLs that comes in blue and then you can just click, click, click.

So, if you drop me e-mail at This e-mail address is being protected from spambots. You need JavaScript enabled to view it -my name is Al Niven. A-L, N-I-V-E-N. Al Niven at GlobalNetTelecom.com--I'll just hit reply and I'll send you the list of 150 of my competitors. And also, there are about 200 vendors there and also about 50 industry VOIP industry trade sites like Pulver and IPXStream, et cetera. It's a very, very useful resource.

So, I can send you a list of these competing NextGen Telcos--competing ITSPs. ITSP...Internet telephony service provider. And there are now 150 of them. The number of these ITSPs is going up. And quite frankly, I think the number's going to increase again. There's going to be a tremendous surge, in my opinion, in the number of ITSPs once Cisco releases in June, and Ascend releases in June the VOIP router with the real time cutoff feature and the debit card feature. At that point, I think it's going to become a zoo. I think it's going to become just callback where you had thousands of companies selling callback under private label.

There are three different modes of ITSP ownership. A top down model, a horizontal model and a bottom up model. A top down model is a model where one company owns all the POPs, all the points of presence. A good example of that would be UUNet--actually a great example of that would be UUNet. UUNet basically owns all the POPs--end of story. A horizontal model would be a franchise model like McDonald's. Most of NextGen Telcos fall into that model--a horizontal model. A bottom up model would be where the POPs and the clearinghouse are truly separate companies and ITXC would fall into that model, GlobalNet would fall into that model...where the guys that own the POPs in the different countries are completely separate from the company that is doing the clearing.

So, that's bottom up, horizontal and top down. Then there is the issue of vertical integration versus food chain integration. The guy that spoke before me at Intertel, he's a good example of vertical integration. He manufactures the box--the VOIP server--the gateway, and he also runs the network.

A food chain integration would be like you have Dialogic on the bottom of the food chain and Natural MicroSystems on the bottom of the food chain...they makes the hardware. And on top of that you have people that provide the software like VocalTec or Clarent. And on top of that you have the ITSP's NextGen Telco--that's actually marketing the service that functions as a service bureau. In a food chain, the company that makes the hardware is separate from the company that makes the software that is separate from the company that provides the service.

I feel most comfortable with food chain, because that's my background. I've been doing interactive voice response and computer telephony integration for 10 years. You can say that food chain is more flexible. You can say that vertical integration is easier to deal with. You can say that one or the other is safer. You need to make a judgement call on these questions yourself.

The actual business models are black box versus bid/ask versus publish/subscribe versus wholesale/retail.

A black box business model would be like ITXC. When you are doing business with ITXC and you are a POP in Spain and another guy's a POP in Paris...ITXC does not necessarily want you, the guy in Spain to know the identity of the guy in Paris. He's a black box. You have to trust him. And he does the settlements, he does the clearing. And he's kind of like an information broker in the old model of being an information broker.

Bid/ask is like NASDAQ, where you bid a rate and you have an ask for a rate. A good example of bid/ask models would be RateXchange.com, or BandX.com. These simply say, I'm looking for this rate on minutes. I want to buy this rate on minutes. You pay them a certain commission up front. Once RateXchange or BandX tells you the identity of the other guy they're out of the picture. It's a one-time only brokerage on a case by case basis. Once they give you the identity of the other party, they're out of the picture.

Wholesale/retail: Most of the NextGen Telcos is in the wholesale/retail model. It's a model that I don't feel particularly comfortable with. The wholesale/retail model says we're buying and selling minutes. We're going to sell you the rates. We're going to sell you the minutes at x wholesale rate. You can sell it retail at a y rate. They keep a great deal of control with the wholesale/retail model.

Most wholesale/retail models basically determine what your commission's going to be. They keep a great deal of control over it. I'm not terribly happy about that.

GlobalNet works on a publish/subscribe model, as does a lot of other NextGen Telcos. Publish/subscribe means you're the POP in Barcelona. You publish what you're charging the other NextGen Telcos to terminate in Barcelona. You're going to charge them 10-cents a minute, 15-cents a minute--whatever. All the other POPs in the world have a copy of that--rate table, that routing table that least cost routing table. In other words, each of the POPs in our network have exactly the same database.

And if you're in Barcelona and you're charging other people 15-cents a minute to terminate in Barcelona, everybody else sees that. Likewise, you subscribe to what the others are charging also. And then you can set your own priorities. You can say--okay, I'm transmitting to Barcelona. I want to go through the local POP over there, or maybe I don't trust him, I want to go through New York and pay 5-cents extra, you can prioritize your own routing.

Network.... public versus private versus hybrid. Are you going strictly public Internet or do you have a private managed IP network. If you have a private managed IP network you have to pay for the minutes whether you're using them or not. You have to pay up front.

Are you having territorial exclusives versus no territorial exclusives? Are you allowing cherry picking versus no cherry picking? So, meaning--we say somebody is ITXC Barcelona and nobody else, once we give this contract to Mr. Jones can put any POPs under the ITXC name in Barcelona.

Quite frankly, of 150 competitors in the business, nobody's doing territorial exclusives. It's a business model that just doesn't work. It's like communism. And indeed, our goal is to have 10,000 POPs around the world. If it's Barcelona, I'm happy to have 5 guys in Barcelona. That makes our offering that much more powerful.

However, there's a very important catch!

Please understand that because there's no territorial exclusives--you have the issue of cherry picking. Meaning the guy who's ITXC in Barcelona might have under his roof a Delta-3 box, a GlobalNet box, an Intertel box, he's free to do that.

Now when you go back to Delta-3, they'll say--okay, we have 500 POPs around the world. But the issue is is that each of those 500 POPs is also a member of 10 other NextGen Telcos. Okay. So, it's not enough to say you have a POP. Yes, I have a POP in Barcelona. But that POP has got 4 servers under his roof and he's cherry picking.

The question is, the bottom line is, who's generating the minutes? Who's getting his minutes on the origination? And cherry picking is very important. We understand that if we place a box in somebody's POP the competition is not yet over. In other words, just because he's bought our server and he's placed it in his POP he might have 3 other servers in the same place and he might be cherry picking with different rate plans, different access numbers.

You know, if Delta-3 has got better rates to Moscow he may offer a Moscow plan. If I have better rates to Panama, he may offer a Central America plan, whatever. He's going to cover his bases by having more than one server. And I think that's the nature of the business. I think it's the appropriate way to do business. I actually did three years in the videoconferencing business and that's what people did in the videoconferencing business. They had a PictureTel Gateway, they had a Video Telecom Gateway, they had a CLI Gateway. And this way they had a lot of ubiquitousness. They had a great spread that could talk to many other public rooms. The issue of inter-operability is not relevant here.

Relative to the third world and the regulatory issues in the PTTs--when I spoke at Voice and Net Show in Washington, DC in September--I spoke on deploying in third world and being under the radar. And the bottom line is if a big company wants to get into a third world country, they're going to have a much harder time than I am.

A good example right now is India where the regulations are very strict and Pakistan where the regulations are very strict and China where the regulations are very strict. You can talk to 10 guys in a country and 9 will say--oh, I can't do this, it's illegal, I might go to jail, get arrested for spying, whatever. And you speak to the 10th guy, and the 10th guy will say--oh, I'm doing it already. I have 7 servers. I'm doing x hundred thousand minutes a month.

I say--how can you do this, it's illegal? [No answer.] He just does it, okay? So, people are out there doing it whether it's legal or not legal. And people--each person has their own technique in their relative country. And I think with the paradigm that you're going to see here is--is what starts out as illegal--I shouldn't say illegal ... I should say legal gray area.... something that starts out in a legal gray area eventually becomes a political issue. What starts as an economic/legal issue becomes a political issue.

If you have 100,000 users, 200,000 users that are doing something semi-legally--eventually, no politician is going to say--hey--we want to cut this out, because it's too popular. They'd be harming themselves. So, that's one of the reasons we are full speed ahead in all these countries exploiting the legal gray areas as much as possible, because we know--the cat's out of the bag, I'm sorry to say this for the PTTs--but the end game is here.

Whether the end game happens a year from now or five years from now we're very focused on moving ahead in that way because we know eventually countries come around to the proper attitude. I mean, one of the ironies is is that for example in Pakistan, where they were taking the ads out in the paper that said--you'll go to jail for 7-years if you do VOIP--the PTT itself is eagerly and secretly trying to get into the business.

So at the same time that they placed ads in the paper with these warnings, they were talking to my company, they were talking to Delta-3; they were talking to ITXC at the very, very same time. So, they were angling to get into the business themselves while trying to threaten people.

The irony is is that many guys in XYZ country where VOIP is illegal have a piece of paper, a dispensation, an exception to the license that make them able to do things that other people aren't. This could be from baksheesh or guanxi that is acceptable in many countries or it can be because the guy is a consultant to the PTT and they cut him slack because they like picking his brains.

So in a lot of these countries the so-called laws are very porous and they're very arbitrary. And it's just a question of a rising tide. Now, let me allay the anxieties of some of the PTTs here, lest you think that I'm just some sort of iconoclast trying to make you feel uncomfortable.

There was a great article in a magazine called Tele.com...Tele.com Magazine. And the article was called--THE NORDIC TRACK. And the article was about the PTT of Finland that was quaking in its boots. They were really terrified because the government said-- we're going to allow competition now. And basically overnight, the PTT of Finland was destined to lose 50 percent of its business due to new competition. And they were really scared.

And the point of the article was that 2-years later after this competition was introduced in Finland, the former PTT and these other companies are now making more money, more profitable, healthier than they were before. The competition forced them to get into GSM, it forced them to get into VOIP, it forced them to innovate in ways that they never did before and add other revenue streams.

And the end of the article is that the sum total of all the communications in the country has increased like five-fold, ten-fold. And the companies are much happier, much healthier. So, you shouldn't just say--oh, this is terrible--this competition. I'm going to lose my revenue. They were faced with this very, very same prospect and the ultimate result was strength and greater profitability.

And if you want me to send you a copy of this article--first of all, you can look it up under tele.com.com. The name of the article is--THE NORDIC TRACK--N-O-R-D-I-C. But if you want me to send you a copy, you can just e-mail me and I would send you a copy of it. Tele.com.com. It's a great magazine and I can also send you a copy of the article myself.

Which servers we should use? I'll just finish with this point and then I'll take questions.

There are 4 architectures on the servers. You have the PC-based architecture; on top of that you have the proprietary chassis architecture like Nuera and Netrix. On top of that you have the router-based architectures, and on top of that you have the CO-switch-based architectures.

Relative to the CO-switch architectures--there's some hot little companies coming out like Salix and Sonus and they're talking about these class independent switches, i.e. that are not Class 4 or Class 5. And these switches can handle hundreds of thousands of calls simultaneously. And they have the VOIP built in. And they have the traditional circuit switching built on.

So, there's a whole new class of switches coming out--for central offices. Salix, Sonus these are heavy, big mama switches. I think the PC-based switches are going to die. My company right now supports 4 switches. We support Arel, which is PC-based. CPM which is PC-based. Ascend and Cisco. Those 4 boxes.

But we think the PC-based stuff is going to die once Ascend and Cisco release in June the real time cutoff and debit card. In other words, everything we do since we're mostly in third world countries is prepaid. We cannot bill. I mean; it's way too exposed. So, even though I'm kind of jealous that all these other companies are using Cisco and Ascend, I can't touch them right now because they don't do prepaid.

There are a number of companies working on a prepaid solution for Cisco. In fact, a little later today, Kevin Alodi from Portal is going to speak. He doesn't know me from Adam. He doesn't even know my name. But he'll probably tell you about the prepaid solution that he's developing for Cisco. And once that happens, I think what's going to happen is that Cisco and Ascend are just going to flood the market.

Cisco's an 8 billion-dollar company. Ascend is almost a 2 billion-dollar company. I think when those guys sneeze, all the PC-based guys are going to get real sick. Note that all the ISPs in the world have all have these routers. They can just add a module to their 5300--boom--they're now a central office. They're a Telco.

And if you think about it, all the routers in the world from all the ISPs in the world form the de facto infrastructure of the largest phone company in the history of the planet. All that has to happen is all these ISPs in the world have to say--gee, hmm, I have a router connected to all the other guys' routers. It has a VOIP module. We're a phone company! And it makes AT&T and British Telecom and France Telecom perhaps relegated to the wholesale business of just selling pipes, because the ISPs are much closer to the customers. They're right in the customer's face offering value-added services.

And I think there's going to be a competition by the end of this year amongst my industry the ITSP industry, the NextGen Telco industry, as to who is going to have this plum, this peach, of managing these Cisco routers on a global basis. In other words, who's going to be a clearinghouse, who's going to be the settlement house? I think it's going to be a beauty contest ultimately between Delta-3, ITXC, et cetera, that is companies that have proven that they can do it. They've done it. They have a managed network. They have a track record. They can go back to these ISPs and say--look, let me be your clearinghouse...we want to manage your network. So, I think that's what's going to happen. I think the router based guys really have an inside track on this and I think that's why John Chambers is smiling from ear to ear.

But anyway, that all remains to be seen as this year unfolds. I think this year is going to be a very, very exciting year. In fact, the number of Gateway manufacturers is also going up. There used to be 20. Now, there are 40 of them. And a few of the professional analyst groups predict that 50 percent of all traffic in the world is going to be VOIP by the year 2003.

At any rate, that's all very exciting stuff and it's all happening this year. Let me stop now and take questions...

[QUESTION]

Reply: Yes, we use the Arel box that is owned by Nortel. Arel is 20 percent owned by Nortel. Arel--A-R-E-L. That's the server we use. Nortel Company. And they're--the big three is now Cisco, Nortel and--okay, Nortel/Bay, Cisco and Lucent/Ascend--those are the big 3. They're all in the game. Questions? Yes sir.

[QUESTION]

Reply: Clarent is one of the Gateway manufacturers based on the NMS boards. Great box. Has SS7 capability. And Lucent is a separate box. Lucent is also based on NMS. And it too is a different PC-based system.

[QUESTION]

Reply: Yes, I'm not high on the PC-based stuff at all. I mean, the advantage of a PC-based platform is that it gives you greater flexibility in programming these value-added services. And the value-added service is the mother's milk of revenue because one thing we understand in the States is that you can't just sell dial tone. If you only sell dial tone you'll die. Value added services are a way you can distinguish yourself and it's also a way to keep the customer loyal. Once he's tied into you because you're not only providing VOIP, but you have voicemail capability with the VOIP or conference calling capability, he's much less likely to leave your company and go to somebody else.

[QUESTION]

Reply: A hundred percent. One person has said that in the "battle" between the netheads and the bellhead--the bellheads have already lost. Because the ISPs are so much closer to the customer in providing all these services which are critical to you .....like ISP roaming.

It's a great combination. And what's also very interesting is that the ISP world--who I think are going to have greater and greater influence, so that the ISPs actually become the central offices of the future--these are people that tend to be more UNIX-based and they tend to be more into open-source software. The word "proprietary" is a dirty word for those guys. And the ascent of Linux is a good example of this.

So, I think you're going to see a similar situation in telecommunications, like that which is happening in software. You have Microsoft as dominant and now Linux is just exploding. Intel has invested in Linux, and so has IBM, Dell, Informix, Oracle, HP et cetera, et cetera. The open-source software model is in ascendance. People don't want to put up with the constraints of proprietary anything.

I think you're going to see a movement like that in telecommunications also. Especially since the ISPs with their router-based infrastructure are going to become more and more influential--whether they like it or not. When I started calling ISPs three years ago, I said--"Telco" and they didn't understand the word. I said, "make some money per minute" and it went right over their head. They had no clue what I was talking about. These guys did not understand telephony three years ago.

Today when I call an ISP, 75 other of my competitors have already contacted him and he knows all about all telephony. He bought Jane Laino's book "Telephony For Data Professionals. They've learned some new terms, "tip and ring". So, these guys are learning real fast all about telephony.

And they're smart guys. So you'll see telephony become a subset of the MIS department anyhow.

Moderator:

Allen, thank you very much.

[APPLAUSE]

*****

Transcript of Allen Niven's Presentation at
TELECOM 98
September 1998 (New York)

 

Hi. We are a NextGen Telco with voice over IP and fax over IP. Is anybody here not familiar with that business model or the NextGen Telco business? The voice over IP business? Okay I'll give you a brief introduction to that but before I start I have a list of about 300 URLs website references and it has a list of about 130 competing NextGen Telcos, meaning companies that are involved in the voice over IP business. It also has a list of about 125 vendors and industry trade organizations.

The reason that it's not on a piece of paper is that it's kind of useless for you in print but if I send you the e-mail, you know the URLs are in blue and it says http and you just click and surf through it. So if you drop me an e-mail I'll just hit reply and send you the list and then you can click to your heart's content. And it's a great resource to learn about the voice over IP business and the fax over IP business.

You could drop me an e-mail at " This e-mail address is being protected from spambots. You need JavaScript enabled to view it ."

There is about 130 NextGen Telcos. It's absolutely amazing to me how the number keeps going up. People here might have heard of OzEmail, ITXC, Delta 3, NetTrue, some of the bigger names in the NextGen Telco field. Any of those names ring a bell to anybody here?

Let me give you a quick introduction as to the way this thing works. We have 120 points of presence deployed in 120 cities around the world. These are all PC-based VON or FON gateways; voice over net or fax over net gateways. And the way it works is that the end-user calls into the local gateway, puts in his account number, puts in his password, puts in his destination number and now he's into the gateway - let's say for arguments sake it's a VocalTec gateway.

Let's say the gateway is in Paris and the guy is calling Tokyo, Paris and Tokyo establish a VON connection, a voice over the net connection, and that piece is essentially free. And then the gateway in Tokyo goes off-hook, delivers the call locally and the guy has now called from Paris to Tokyo for the cost of a local call in Tokyo. Does anybody have any questions on that? Are we clear on that?

The piece from the guy's house to the local node in Paris is a local call. The piece from the Paris node to the Tokyo node over the net is free and then the Tokyo node goes off-hook and delivers locally in Tokyo. So you've called halfway around the world essentially for free for the cost of a local call.

Now there are four players here. There are the end users and there are the node owners. There's a node owner in Paris; there's a node owner in Tokyo. Let's say the guy calls from Paris to Tokyo, he's on the phone for 15 minutes blah, blah, blah... he talks away. He's now incurred an expense of - let's say Tokyo costs three cents a minute to make a call in Tokyo so now he has incurred a 45-cent expense. Now the node owner in Paris owes the node owner in Tokyo after markup let's say a dollar, because the node owner in Tokyo has been nice enough to go off hook and deliver that call on behalf of the node owner in Paris.

So the only cost that's been incurred is the local call that is in the terminating location. Therefore, many, many businesses - and this is what NextGen Telcos are all about - have sprung up to handle the clearing or settlements between the node owners.

The way we work is that there are three copies of the call detail records that are generated. There's a CDR generated in Tokyo, there's a CDR generated in Paris, there's a CDR that comes to New York City at the clearinghouse in settlement. At the end of the day we take all the CDRs and we take one dollar from the Paris node owner and we give one dollar to the Tokyo node owner and we take a settlement fee for ourselves. That's the basic model. Are there any questions on that model so far?

Now there's many, many ways to go about this. Now that we have the basic issues the question is how do you run the business and there are three business models and there are many, many sub-business models. One business model is a top down business model. An example of that would be UUNet okay where one company owns all the nodes, all the gateways worldwide. And that's easy. I mean you have employees, you open up offices, you own it all. It's not much of a difficulty.

Second business model, what I would call horizontal business model, that would be like McDonalds. That's a franchise okay and the company that does the clearinghouse and the company nodes, the gateway owners, they're all part of the same company and the clearinghouse company gets a fee. It's a tight marriage. Maybe a very restrictive marriage. An example of horizontal business model I guess would be GX3. Probably 90 percent of all the competitors use the horizontal model.

The last model would be a bottom up model and actually the most successful companies in the business are bottom up. In a bottom up model the company that's doing the clearinghouse and the companies that are nodes are completely separate companies. So ITXC that has just gotten 10 million dollars, a bunch of capital from AT&T, they're a separate company from the node owners, the guys in different countries that actually own the gateways.

Now within the bottom up model there are a number of sub-models. You have Publish-Subscribe, Wholesale-Retail, Black Box and I want to go over each of those. ITXC is a black box model okay. When ITXC does the clearing you just deal with ITXC. That company in Paris does not know the identity of the company in Tokyo. They don't know each other. You have to trust ITXC. ITXC handles it all. That would be a black box model.

A pure bid-ask model would be like NASDAQ and some examples of that would be Rate Exchange or Band Exchange - you'll see their URLs on the Internet list - and basically they're just a bulletin board type system. A guy says hey I have minutes to sell here, someone else says I have minutes to buy there, the broker puts them together, he gets a fee, end of story. Once the two of them know about each other the broker is out of the deal. He just basically X'ed himself out.

A wholesale retail business model would be like OzEmail where a company controls the network and he says look guys I'm selling you the minutes for x cents a minute you know and I'm going to give you a commission and I control the retail prices etc. It's on a wholesale retail basis. So essentially the clearinghouse sells the minutes to the node owners on a wholesale basis.

The last model is the model that my company uses, a publish- subscribe model and it utilizes lease cost routing on a global basis so that each node publishes what its landing charge is, meaning what they're charging the other nodes to terminate in their gateway. And they also publish the retail rates, and everyone subscribes to that database. And we control the database from New York City remotely. Nobody can make a call or make a fax without us. They can't do anything without the central control.

And in the publish-subscribe model it's necessary to establish rules how you're going to run this so some guy in some country doesn't say, "gee I'm going to charge five dollars etc. So the contract that every node owner has signed with the clearinghouse specifies that the landing charges cannot exceed 500 percent of the local PTT, and local PTT rates is publicly available information.

People here might have heard of the Lynx database so that if anybody wants to verify the PTT tariff in a given city you log on to the Lynx database and you can verify that. So there are no secrets in the group. All the call detail records are publicly posted on the FTP site. In fact each node owner could look real time in a browser into every other gateway so there's no possibility of shenanigans.

So the landing charge cannot exceed maximum value 500 percent of local PTT and 100 percent of domestic PTT. And the reason we capped the landing charge, the logic behind that was we didn't want people to depend on the inbound traffic only, to sit on their rear end and just say, "hey… I'll make money on the inbound".

Therefore the inbound landing charge is capped at a certain maximum and you're supposed to make your money on the outbound that is completely dependent on how much marketing and advertising you do. But practically speaking, on a practical level, every node owner knows they are never going to have to pay more than 15 cents a minute to terminate at any node that's on the network. Because there's a not a city in the world that will charge more than 3 cents per minute for a local call.

The group itself is managed by group consensus. We have a discussion group and a voting page, etc. We do have a contract, a 15-page contract written up by the attorney and it says that we're governed by the laws of the United States, but it's actually silly.

When you're dealing in this type of environment if some company in Bangladesh wants to leave the company and become ITXC Bangladesh tomorrow there's no way I'm going to sue the guy in Bangladesh. It's just not going to happen. We don't have any illusions that there is going to be any legal recourse when you're dealing with people all the way around the world.

So the bottom line is that we have to earn their business every day and we try to do that by delivering these services: settlement fees, wide area network management, and global marketing.

Now to address some of the issues that I mentioned in passing earlier. I'm dealing with PTTs; I'm dealing with governments and politics, co-location deals and competition. That's all very interesting and it's very juicy especially for us. We're 75 percent in Third World countries. Everything we do is over the public Internet.

Since the fax is store and forward there are no bottlenecks and as far as the voice over net is concerned Third World originates, first world terminates. You can't originate voice over IP calls into Third World. It's like stuffing a golf ball through a garden hose. It just doesn't happen.

The pipes overseas are very expensive. A 64K connection to the net overseas might cost you 6,000 dollars a month.

If that node-owner is going to receive traffic from the USA he cannot stay in business. This is because the most expensive countries from the USA are 70 cents per minute. For Internet telephony the retailer would have to sell it at 35 cents per minute. This would leave 17.5 cents per minute for the USA retailer and the 3rd world node-owner. Even at high usage on a 4 port gateway the 3rd world node-owner could not make enough money to pay for his Internet connection.

If however, the 3rd world node-owner is ONLY doing outbound from his country, and he is paying 10 cents per minute or so to terminate in the USA AND he is charging between 50 cents per minute to $1 per minute for the outbound (because the PTT is charging $2-$5 per minute) then he can pay for the connectivity and make a profit also.

There is an exception though to the general practice that third world originates and first world terminates, and this, this really boggled my mind. Companies like Paul's and many others have approached me quite surprisingly, I didn't even anticipate this as a market, and we actually deployed one of these already. Cause we don't deal in first world. We don't deal in the United States. We don't originate from the United States.

But many of the companies that were in the first world traffic business came to me and said hey I have traffic to a number of countries that are very expensive. Mozambique is more than 70 cents a minute, or Tajikistan is more than 80 cents a minute. And we have people there.

e have people there that have navigated the legal issues, they are deployed, they're installed, and they've paid whomever they need to pay. Whatever reason there is they're stable. And these first world companies came to us said hey we want to deploy in, we want to terminate traffic in Mozambique. They said they had traffic on the order of millions of minutes that would cost justify the connections. I said fine. If you pay for the T1 or E1 gateway on both sides and you pay for the T1 or E1 Internet connection we'll do it. And those deals are still pending.

They had a market for Mozambique traffic and our guy in Mozambique would just baby-sit the equipment. He just makes sure that you know that we can receive. He makes a very nominal amount. It's not a landing charge. He might make a penny a call. But he receives this inbound traffic.

Now we actually get a little secondary benefit out of it also because all the faxes that are coming in put a little header on the top that says for the return trip speak to John Doe in Mozambique, the local node owner. So it's actually an interesting situation where traffic from the first world is stimulating traffic on the return trip back from the Third World.

Another issue is the PTTs. A lot of the guys are playing cat and mouse with the PTT. I have some amazing, amazing stories. For example in Pakistan they placed an ad that said if you do voice over IP we'll throw you in jail for seven years. But our guy has got a piece of paper. He has an exemption and he's allowed to market voice over IP. He's also a consultant for the PTT.

In fact at the very same time that the PTT is telling people they'll throw them in jail they're talking to us, they're talking to Delta 3, and they're talking to ITXC. They're trying to get into the business themselves and they're trying to--look for international partners with whom to trade traffic.

And in fact, again, I was really surprised because for the longest time I was looking at the PTT as the adversary and in fact we've been contacted by the PTT of Cyprus, of Latvia, of Slovenia and a bunch of other small countries that realize they can't do voice over IP in a vacuum. They have to team up with others to handle the settlements. So that was a pleasant surprise.

Now relative to one of the issues that Paul mentioned about politics I really enjoyed that very much. One of my favorite adages is that "it's not a not a country, it's a company with a flag". What you want to do is get to the president and the president of the country is the president of the company.

Now one of our investors invested 40 million dollars in Uzbekistan - he was on the front page of the Wall Street Journal - and he did 50 million in revenue in Uzbekistan last year. And he hangs out with the president. That's the only way to do it. And we are trying to introduce it to Tajikistan. And he says "write to the president". You don't want to speak to anybody lower than that.

And he tells us amazing stories. He had a contract with the Telecom Ministry to be the exclusive vendor the exclusive telecom provider of the country and then they dissolved the ministry, established a different ministry, the Ministry of Information Technology and they told him his previous contract didn't mean anything. And then they invited four other people. So you know in Third World countries it's definitely a Wild West and you have to have a taste for it. Which we do and we enjoy it.

30 percent of our network is composed of Dialogic developers. We have about 10 Ph.Ds, 10 MBAs, 20 Masters degrees and the advantage of having this type of education in a Third World country is that it usually positions you very high up with the government. Like our guy in Ghana sits on the FCC in Ghana. The guy in Tunisia is a Ph.D. in telecommunications and he works with the Prime Minister of Tunisia, etc., etc., etc.

So if you have high education in Third World countries it tends to position you very, very well. And we are strictly focused on the Third World. One more issue on the politics which I think is really, really interesting because Paul was talking about how the countries diverge in their response to competition. There are a lot of countries, especially the Third World countries that say, you know, this is mine and I want to protect it, and they don't understand that competition is the lifeblood, the lifeflow of an economy.

But there was one notable exception. I want to take a minute or two and bring it to your attention, because it was so inspiring to me and that exception was Finland where the government said hey we're going to privatize and we're going to open this up to free competition, and Telecom Finland overnight lost 50 percent of their revenue! Okay?

And people didn't, like, freak out; they didn't hire hit men. What happened was, was that two companies emerged in Finland, and now both of them are making more money, more profitable, more revenue than they ever did before, because the, the competition forced them to innovate and leave their traditional long distance business and expand into cellular and into voice over IP and to other value added services which really benefited the Fins and made people happy, and it was a win/win/win situation.

So if you ever are in a situation where you are speaking, to a politician in a country that says, "gee we're terrified of privatizing", you really can point to Finland as an example, and if you want to research that more there is an article called "The Nordic Track" from TeleDotCom magazine which describes this in Finland.

Okay, I'm really glossing over a lot of the intricacies of how we work; it's a lot of fun. So now I'm going to turn it over to any questions you may have so you guys can pick my brain. Any questions relative to how we work? Yes sir.

[INAUDIBLE QUESTION]

AL NIVEN: The Nordic Track is the name of the article. It's from TeleDotCom magazine. Yes sir.

[INAUDIBLE QUESTION]

AL NIVEN: A good question. We have dialers that are optional that sit on the fax machine so people can just, fax as normal. And the success rate is absolutely phenomenal. It's a higher success rate than you have if you fax directly, because you're only making a local fax call in the terminating city, and it's actually true not only for fax but also voice.

[INAUDIBLE QUESTION]

AL NIVEN: No, full duplex. Absolutely. Yes, sir. Yes?

[INAUDIBLE QUESTION]

AL NIVEN: Well, okay, let me rephrase that. The, the--the - it's, it's, it's a data connection because it's a VOIP connection over satellite. If you, if you do do the VON over satellite in fact it does introduce extra latency; but all I can say is experientially it just seems to cut through faster; the post-dialing digit delay seems faster, you know?

You know, when you - for example you might have had the experience of calling Russia over PSTN. After you call Russia you wait for like 45 seconds before a connect. With VOIP it just doesn't seem to happen; it's just boom. It's done. That is just anecdotal experience, I have not investigated that fully yet.

[INAUDIBLE QUESTION]

AL NIVEN: Yes. Absolutely. Yes. Yes, yes. Question?

[INAUDIBLE QUESTION]

AL NIVEN: Okay. That's an excellent question. I, I kind of you know, I'm speaking a little bit off cuff here so I appreciate your picking my brains. We have a couple of nodes that function as off-net hubs, so if I don't have a node in a given country, it goes through Sweden or USA; I mean it - basically it goes through who-ever is the cheapest, and there's a couple of good examples I can give you.

I don't have anybody in Sudan. If somebody's calling Sudan, it goes through our Egypt node, because the guy in Egypt has a really great rate to Sudan and his rate to Sudan is better than anybody else's rate to Sudan in the entire world.

But we have a few countries that function as hub countries -- Sweden, UK, United States, Chile which are really the 4 cheapest countries in the world, those will deliver if I don't have a node in that, in that country.

Does that answer your question? Okay. Yes.

[INAUDIBLE QUESTION]

AL NIVEN: Yeah, I do, and that's really thrilling. It's, it's [LAUGHS] - you know, actually that - I, I had prepared a more formal introduction and I wanted to cut to the quick - I was concerned I wouldn't have enough time, so I didn't want to get into it.

Gardner Group or one of the other famous analyst groups says that 45 percent of all traffic in the world, period, is going to be IP by 2002. And my subjective verification of that is I have been in this business now for 3 years, and we are by far the largest NextGen telco. We have 120 pops. Nobody comes close. I think Delta 3 has got like 50 now in their advertising. But one of the things that amazes me is that you think there'd be a shakeout by now, you know, meaning that the number of competitors would start to be reduced! They're not! They're still growing! That list that I'm going to send you actually now has 130 competitors. I haven't even kept up to add the latest ones. So the fact that the number of NextGen Telcos are still growing would seem to be consistent with high predictions for VOIP.

I subscribe to two newsletters that I would recommend to everybody here - pulver.com pulver.com - P U L V E R - he's the guru in the VOIP arena. I've spoken at his shows every year for the past 3 years; he has 2 shows a year.

The VON show - the Voice Over the Net show -that's a very serious show. There's no free admission. You have to pay 2,000 dollars to go in. There's no booths. It's only deal-making. It's really very intense. Fifty percent of the attendees are from outside the United States.

And the other newsletter is ip-exstream I P X S T R E A M. Question. Yes.

[INAUDIBLE QUESTION]

AL NIVEN: That's an excellent question, and I want to address that. There are some people that say VON or VOIP opportunity is merely a rate arbitrage opportunity.

It isn't. It is the VON issue, the way I see it, I mean we are- we're going for a global brandname. The issue in my mind is not a rate arbitrage issue. The issue in my mind is that the fact, and I think most technicians would agree with me, that packet switching is inherently more efficient than circuit switching.

In addition it introduces a new mentality, because you can't say there's a pipe between you and me and two tin cans at the end, and I own this and you own that and at the end we do a settlement fee.

What's happening is, is that the infrastructure of the cloud - the copper cable - is becoming a shared resource! You have to share it. And as it becomes more shared or more communist for lack of a better word, it becomes more efficient; okay: packet switched is more efficient.

So I think you're going to see global networks on a packet switched foundation, IP foundation. The issue is not merely the efficiency but also the "value-addeds," so you establish your base line for your, dial tone or shall I call it, you know, net tone, whatever -- and on top of that you throw in the value-adds.

Now like I say 30 percent of our guys are Dialogic developers, and I have 4 partners in the company - and all the partners are actively involved in writing software on a day to day basis, or in other capacities, so we come up with these value-adds.

So the value adds we're coming up with would be conference calling, send and forget fax, never busy fax, you name it.

I mean once you, once you relate to the former PSTN as a platform instead of a cloud, the value adds that you come up with are basically limitless, and that's really where the money is, because customers that are using value added services tend to be more loyal - they don't switch companies as frequently. Question.

QUESTION: What do you see as far as changes in your ability to change your, your billing options or plans as 45 percent

AL NIVEN: Well this is a major, major, major question. Yes we have great billing software that we wrote in-house. Yes, we have great settlement software that we wrote in-house.

But there are real I would say, big mama powerhouse billing communicates - Portal, Kenan, Amdocs, come to mind. They've received some massive venture capital.

I mean these are companies that are writing billing software specifically designed from the ground up for IP telephony, completely SQL-based, etc, and I, I'm looking forward to the day when I need their software. That would be really neat. Good question.

[INAUDIBLE QUESTION]

AL NIVEN: Well right I think it would be marketing. I mean we've already got the ball rolling, and now I'm looking forward to the next few months because I see a lot of, magazines that want to interview me. So we've already worked our butt off for the past two, three years developing and building this network, and we're just about to get to the point now where it's on the sweet side.

[INAUDIBLE QUESTION]

AL NIVEN: That's an excellent question. It's an excellent, excellent, excellent question. The architectures come in the four generations. Okay, the first generation architecture was a PC-based VOIP gateway.

Second generation architecture was your proprietary chassis gateway like Nuera and New Bridge, Micom. I hope the guy from, I hope the guy from Cisco is not going to be angry with me for the next comment.

Third generation is what I would call the router-based VOIP. And the fourth generation would be the CO-switch-- you know, big mama VOIP, and that's a fascinating point, because as recently as 6 months ago Nortel was saying they're not going to have VOIP as part of their central office switch for 4 years.

Well that changed. They're now saying that in 1999 the DMS-300 is going to have VOIP built in. Now this is like massive so the VocalTecs of this world that have already made their money - you know, they sold 10 percent for 50 million dollars to Deutsche Telecom and Netspeak and all these others PC-gateway guys -- they are going to vanish. They're going to be morphed into pure software development houses.

Okay? The Dialogic-based PC stuff is just not going to cut it. In fact we're talking to Cisco right now for a deal for them to finance all of our gateways worldwide, and so we would have two parallel networks. The first generation network which would be the PC-based gateway network, and the third generation which would be the Ciscos.

Again, we're really 75 percent in third world countries. We're in countries you never heard of. We're in Benin, and we're in Togo, we're trying to get into Tajikistan, and we have to think small. You know, even for the Cisco stuff that we're talking about, it's also the low-end analog Cisco stuff.

Politically these countries, if you say you want a T-1 they come up to you, you know, with a microscope looking up your every orifice of your body to find out why you want a T-1. You're much safer saying hey, I just ordered, you know, 5 or 6 tip and rings, you know, analog lines, and we just kind of grew, you know, into 30 tip and rings; it attracts less attention.

So those are the architectures. Started off with PC-based; we will be shifting to the Cisco-based. If my people ever need central office switches in Togo - Amen. [LAUGHS] That would be great. Question.

[INAUDIBLE QUESTION]

AL NIVEN: They will morph into a pure software company. I mean Dialogic and the PC-based industry is not going to vanish, but-- you know the, the router-based and the CO-based stuff are inherently more efficient;

Question. Yes.

[INAUDIBLE QUESTION]

AL NIVEN: Well, I'm, I'm ecstatic about what we're doing in Africa. We have almost the entire Northwest Coast, you know, the Gold Coast, we have almost every country there from Ghana all the way to Nigeria and everything in between Benin, Togo, Ivory Coast, Senegal, etc. We have two of the Magreb countries, we have Morocco but that's an impossible place to do business.

We have on the, on the south side obviously, Swaziland, South Africa. our guy in Tanzania is one of the strongest nodes in the entire group. He's just ecstatic with the voice quality; he, he sends recommendations about us all over the world.

So yes, I'm very happy about Africa, because that's a lot of where the money is. These guys are on low-volume, high profit margin situations. You know, the PTT might be charging 5 dollars a minute. Some of these guys are charging a dollar a minute and they're making 80 cents a minute! They're very, very happy people.

And that's just on a 2-line or a 4-line system PC-based system! So the PC based systems shouldn't be denigrated outright. People here in the United States are very much in the habit of thinking high volume, razor thin profit margin. We're just the opposite. We're having very low-volume, very high profit margin traffic.

[INAUDIBLE QUESTION]

AL NIVEN: It depends which country. Some of them are absolutely adversarial relationships and you play cat and mouse, and we are completely as the term Paul just used under the radar! And you know, we, we push the legal limit as much as possible.

But you know my joke about that is -- in the old days people used to talk about the divine right of kings. We talk about the divine right of the consumer. Okay? And we try like you know, to establish facts on the ground. In other words politically what happens is let's say you go in under the radar. You get a hundred thousand customers -200,000 customers.

It's simultaneously an economic event, and it's simultaneously a political movement! Because once you've got 200,000 happy customers, it's a lot harder for a politician to say hey, you know, we're not going to do this any more.

I can give you a really great example, and that would be Argentina. In Argentina today, 25 percent of every international call coming out of the country is not PTT - its callback or VOIP. It's all illegal! Officially illegal! Okay? So essentially 25 percent of international calls coming out of Argentina is officially illegal. I heard stories that there were government departments that when they put out a requests for proposal, they put out requests for proposal to the callback companies, because they wanted to get a cheaper rate -legal or illegal. One half of the government was doing the opposite of what the other half of the government was doing.

So my philosophy is that I see this as a social issue and part of what I'm doing is, partially a socially conscious, motivated thing. A lot of the oppression is done by the fact that certain countries make telecommunications artificially high to keep people down, and we plug into a very entrepreneurial class of people overseas.

I've personally picked every node owner, and I've rejected a lot of them; and what I always look for is somebody that has very high ethical standards and somebody that's entrepreneurial. Okay? And somebody that's not afraid to tango with the government. And it's a lot of fun; lot of high energy.

[INAUDIBLE QUESTION]

AL NIVEN: Tanzania, Kenya, South Africa, Swaziland, Zimbabwe we just closed; we just closed that deal recently. Israeli guy that's running it in Zimbabwe. I can get back - I mean I'll send you the information if you drop me an e-mail. Okay. Question.

[INAUDIBLE QUESTION]

AL NIVEN: That's a great question! Does everybody understand the question? The question was what about the access charges? Doesn't that spell an end to this business? And the beauty of that question is that's the wrong question, because - because of the fact that you're having a paradigm shift here technologically, okay?

The whole concept of access charges is going to vanish! Okay? This is as true for MCI as it is true for Togo. The bottom line is that the central office switch is going to be an IP-based switch; and Business Communications Review talked about the shift between a tin can model, the settlement model, and what, what Business Communications Review calls the jurisdictional paradigm.

Okay? A paradigm based on IP jurisdictions! Now if you're talking about a paradigm based on IP jurisdictions, there's no more access charges because there's no more PSTN to access! Everybody is on a pure IP network that is, you know, I think a thing that's really beneficial for the world in general.

So I don't see that as an issue. In other words I'm going to push the legal gray area now, push, push, push, push, push, and as the technology changes and as the politics changes, I'll be there, you know when it the changes are complete. We' be there! You know, when, when, when all that starts to liberalize and wake up and become enlightened.

END QUESTION AND ANSWER SESSION

*****

Transcript of Al Niven's presentation at the
VOICE ON THE NET (FALL 98)
on the topic of VOIP in developing countries.

 

Hi. My name is Al Niven. I'm here to speak tonight about Internet telephony in developing countries: Who, what, where, when, why and how.

The first point I want to start off with is some of the difficulties that a really big telco may experience when trying to get into a developing country. And the point I'm going to try to make is that in many ways it's a lot easier for a small company to get into a developing country than it is for a big company to get into a developing country.

When a big company tries to get into a developing country there are 4 problems they may run into. First, the government will try to extract the best deal they can get from a big company. That extraction process can take a lot of time. Second, the government may tell the big company--hey, we'll give you an exclusive license to run in our country. And at the same time, they'll go to five other big companies and say--hey, would you be interested in competing in our country?

Third, when a government of a developing country deals with a big company they have to change the public laws, because you can't let a big company come into your country without changing the laws to adapt to that. That has to be done publicly. And the change of those laws can take a lot of time.

And last but not least, even if a big company does get into a developing country, there's no bandwidth. I mean, Project Flag and Project Oxygen are not to be finished until 2003. So there's no bandwidth. What do you do? Well- our company deals with the constraints that are created by the developing countries' lack of bandwidth. For fax-to-fax, we use store and forward and for phone-to-phone we basically structured it so that the developing country originates and first world country terminates. Period. We don't try to send traffic from first world countries to developing countries. It would be like stuffing a golf ball through a garden hose. It doesn't work.

Now, some of you may say--well, gee--store and forward fax is not going to be acceptable, it's not true. In the developing countries the business is absolutely booming for fax-to-fax over store and forward. If it gets there in two minutes, if it gets there in five minutes--the people don't care. They're happy about it. As far as the phone-to-phone is concerned, we've had tremendous quality, great quality on the third world origination. I invite anybody here to speak to our note owner in Tanzania. He's broadcast e-mails to the rest of our group. Just glowing about the voice quality of the phone to phone, and he has a viable business--he's making money.

Now, the next question is how to actually get in to the country. I've said that small companies can get into developing countries. How do you do it? And there are two ways to do it. I'm going to address both of them. One is being under the radar, and the other is being within the radar.

Now, if you're going in under the radar--and when I say under the radar, I'm not talking about violating the laws. I'm talking about going into countries where the laws aren't created yet, and that means 90 percent of them. Because 90 percent of them have not created laws to begin to deal with Internet telephony. So you go ahead and you push the legal gray area by just going ahead and doing it.

And the three things you want to look for are the "three E's". Somebody that's ethical, entrepreneurial, and educated. And the reason you want somebody that's educated is that in developing countries, people that are educated tend to get special dispensations. So, like our guy in Tunisia, he's Assistant to the Prime Minister. The guy in Ghana sits on the FCC of Ghana. The guy in Pakistan is a consultant to the PTT of Pakistan.

No matter what the political exigencies are in a developing country, they respect education. So, it's real important to get somebody that is well educated technically. Ethical and entrepreneurial because obviously you want somebody that's going to generate the business.

Now, the paradigm and why this is so important --the paradigm that we use is-- what I call the "Argentina Paradigm". Now, in Argentina 25 percent of all international calls coming out of the country are officially illegal, because 25 percent of the international calls coming out of Argentina are either callback or toll bypass. So, the question is--how come all these people haven't been arrested yet?

And the answer is that--and this is our philosophy also--you go in under the radar and you try to establish "facts on the ground". Once you establish a customer base of 100,000 users, you're not going to get arrested. So, it's basically become simultaneously a political movement, so to speak, a political cause, as well as an economic movement.

And one of the funniest things I heard was when the government of Argentina, actually, one department of the government of Argentina actually requisitioned phone services. They requisitioned it from a callback provider. They didn't even requisition it from their PTT, cause their rates were too expensive. So that was an ultimate irony.

So, that's going in under the radar. Now, if you're going to go in above the radar, it's very important that you not be shocked by the behavior of what you encounter. There are a lot of discrepancies there, and you have to be smart enough to realize how to deal with it. So for example, in country x they take out full-page ads in the newspapers that say--hey, if you use internet telephony you are going to go to jail for 7 years.

But our guy has a piece of paper. He's got a dispensation. Okay? And not only does he have a dispensation, but also we understand that the PTT in country x is talking to NextGen Telcos. The government of country x is actually looking to partner. So, on one hand they're saying--hey, this is illegal. On the other hand they're saying--hey, we want to get into this business ourselves. And most government PTT's that know which way the wind is blowing realize they need to be part of a global consortium and they are sniffing around.

Another good example of a dichotomy--is in People's Republic of China. In PRC, in February, most of you might have read in the newspapers that two New Zealanders got arrested for doing fax-to-fax over the Internet.

Two months ago, Rayas Group announced a 5 million-dollar deal with Netrue, to deploy phone-to-phone over the Internet in People's Republic of China. So, in February they're arresting and in September they're writing contracts for 5 million dollars. So, the question is why and why? Well, the answer is--either somebody didn't pay their dues someplace or things have in fact really changed. That's all I can answer.

Some of you that are salespeople might have heard the expression that "the sale begins when the customer says no". Well, when you come to a developing country, the sale begins when the government says no.

What I want to close with is--I want to point out how I feel that Internet telephony, per se, is a blessing to the world. About a week ago, I made a joke to a friend of mine. It was really gallows humor. I said that in 1929, people said that the Depression came about because countries deployed restrictive tariffs against each other and it's widely understood that these restrictive tariffs helped caused the Depression.

I said--today we don't have to worry about restrictive tariffs because Russia, India and Malaysia, they're not doing restrictive tariffs, they're doing currency controls. So, we don't have to worry. That was a little bit of gallows humor.

A week later, the front cover of BUSINESS WEEK was very uncharacteristically alarmist--if you go out and buy this week's BUSINESS WEEK, it says on the cover "Global crisis, we have to act now". And they put out an editorial saying that currency controls are not healthy and they made a list of things that need to be done in the face of governments that are just starting to contract relative to international commerce, which is the wrong thing to do.

So, the point I want to close with and why internet telephony is a blessing in the face of these international commerce contractions is that if money is analogous to the flow of blood in the world, then internet telephony is like the heartbeat that pulses the flow. Thank you.

*****

Transcript Of Al Niven's Presentation at
SPRING '98 VOICE ON THE NET

"Widespread Deployment Of Gateways"

 

Introduced by Dr. Michale Ramalho

Our next speaker is Al Niven who has been in the CTI and IVR business for 10 years. He is now president of a Next Generation Telco with nodes deployed in around the world.

Al Niven

Each of the node owners come from many different backgrounds. Some of them are ISP's, some are traditional telcos, and some are Dialogic developers. I put together a list of 96 Next Generation Telcos and it is a list of URL's. It should be on the CD-ROM that comes with the conference, but in case it is not on the CD-ROM if anyone is interested, you can drop me an email, I will hit reply, and then you will get the list of URL's underlined and in blue, and you can just click, click, click, and peruse this list of 250 URL's, including 96 Next Generation Telco's.

Just drop me an email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

I will hit reply and send you the list. I know Jeff loves this list, he has asked me a few times for permission to publish it on Pulver.com I never give it, but you folks have it by virtue of being at this session.

I want to describe how ours works.

Each node at a very minimum is a $10K PC with Dialogic cards, a gateway for fax to fax, and a gateway for phone- to-phone, and now we are adding Unified Messaging so each node owner will have 3 gateways, fax to fax, phone to phone and unified messaging.

The way we work I think is unique so I am going to try to describe that. Let's say we have a node owner in Paris and a node owner in Tokyo and let's say the customer wants to send a fax or make a call from Tokyo to Paris. So he goes to his fax machine and calls the local node in Tokyo that then establishes an Internet connection with Paris; Paris goes off hook and delivers the call or fax in Paris. Now Paris has gone off hook let's say for 5 minutes and has incurred an expense with the local Parisian PTT so let's say it is 10 cents per minute or something, so the node owner in Tokyo now owes the node owner in Paris 50 cents. We are just talking about the node owners right now.

What happens with us is that each of the node owners has a deposit with the clearinghouse, and at the end of every call and at the end of every fax there are 3 copies of the Call Detail Record that are generated. There is a CDR in the originating node, there is a CDR in the destination node, and there is a CDR that comes to the clearinghouse. And at the end of the day I take all the CDR's and I toss them up on the ftp site and I say OK I am going to take 50 cents from the Tokyo account and give 50 cents to the Paris account and we take a fee for ourselves for doing the clearing, and that is essentially the way it works, as far as the settlements are concerned.

But having a system for the settlements is really not sufficient because how do you stop one guy from saying, "I am going to charge $5 to terminate in Paris". And this is how I think we are unique and this is the thesis of my presentation today and that is the only way this thing can succeed is if you operate this thing on the basis of group consensus and I am going to elaborate this point quite a bit because I don't think any alliance can possibly succeed outside the basis of group consensus, because to quote our famous Vice President Al Gore, "there is no controlling legal authority" (laughter in the audience)...you cannot sue someone halfway around the world, and in terms of carrot and stick, it is almost all carrot. The only stick you have is if the group gets together and takes a vote and says "OK we are going to vote this guy out, he is history, this guy no longer exists in the least cost routing tables, he no longer exists in the database… he is gone… he is out".

And we've done that. We actually voted one guy out, who was unbeknownst to us a representative of Destiny Telecom (has anybody here heard of Destiny?) The Feds shut it down and we told him you can do one or the other but you cannot do both so we took a vote and actually gave him his money back.

How do you manage such a group? How is group consensus achieved? We have a teamware web site, which has a discussion group, voting page, collaboration tools so we can work together on a spreadsheet and edit it at the same time, a broadcast email list, a chat room, so each of these 100 people is in touch with each of the others I would say every day. It's like being naked with everyone else every day; it is like having a board meeting with everyone else every day. So one of the things we decided was how we were going to manage these settlement fees. So one of our guys who is an MBA from Yale, said look, we really want to focus the group on the outbound, because we don't want people sitting around, just hoping they are going to receive traffic, because a node is in control of how much traffic goes out to the extent that they market or advertise but they are really not in control of how much traffic comes in.

So we said we need to put a limit or cap on the landing charge. A landing charge is the charge a node charges another node to terminate. Going back to our example, what Paris would charge Tokyo in order to terminate in Paris. And the way we did it is, there is a public database called Lynx, (that is on the list of URL's), and you can use Lynx to verify what the PTT charge is in any city in the world. That is public knowledge.

So we said we are going to cap the landing charge at 500% of local PTT. Practically speaking what that means is that there is not a city in the world where making a local call is more than 3 cents per minute, so it means no landing charge can exceed 15 cents per minute. So if you work with my company you know you are never going to pay more than 15 cents per minute to deliver a call, plus the clearinghouse fee so let's say 17.5 cents per minute.... you are assured you will never pay more than 17.5 cents per minute to deliver. On the outbound though, you can charge whatever your heart desires. There is no limit to that at all, whatever you can get, relative to the PTT or callback, that is what you are allowed to charge.

You can divide the Next Generation Telco's into 3 types top down, horizontal, or bottom up. Top down would be say where one company owns all the nodes, and examples of that would be UUNet, or AlphaNet Telecom. Horizontal would be most of the NextGen Telcos and is kind of like a franchise structure, where the company that does the clearing and the company that owns the nodes decides to be part of the same company. That can be very limiting because you wind up being contractually obligated to the company you are part of and it can be like a constrained marriage that you did not anticipate. Other companies have a bottom up structure, and ITXC and our company are both examples of a bottom up structure and that is where you have the clearinghouse and the nodes as completely separate companies. They are absolutely separate companies. So any time a node can say Al you are charging us 5% clearinghouse fee, we don't like you; we are going to go to Harry, Harry charges 4%. And there is nothing contractually obligating any node to stick with me, I have to earn the business every day. And it makes the clearinghouse vulnerable, but the paradox is, to the extent that the clearinghouse is vulnerable, is the extent that the group as a whole is very powerful.

And that is why our group has a tight fabric.

So ITXC and ourselves would be what I would call bottom up structures the companies are separate, the clearinghouse is separate from the nodes, but within the bottom up structure there is really 2 different ways you can go about it and this is where I think ITXC and our company are really 180 degrees opposite. A company like ITXC takes the information broker model. Going back to our example of Paris and Tokyo, ITXC may not want the guy in Paris to know the name or identity of the guy in Tokyo, he may want it to be a secret, and basically you are dealing with ITXC as a black box and he really controls the network. We are 180 degrees opposite. Everybody is in touch with everybody else every day. We have had this network for like a year, and everybody is always in contact. Now ITXC, could argue and say "Al, if you do what you do, you are basically guaranteeing you are going to make the least amount of money possible in clearinghouse fees because you are not arbitraging information, you are not arbitraging your knowledge." And I would agree with that 100% that is correct, I am actually making much less that I would make if I kept certain things secret, but on the other hand I have generated a tremendous amount of goodwill with the nodes, because every week I distribute who the latest competitors are, and people within the group are cutting deals left and right, and those deals also create goodwill and expand into other areas in telecom and it makes our affiliate group very strong. For example going back to our discussion page, we have many topics and one of them is Computer Telephony Applications Wanted and Offered (30% of the group is Dialogic developers). Well a guy in Rome needed a debit card application so he posted on the page he needs a debit card switch. It turns out the guy in Mexico makes debit card switches. The guy in Mexico offered the guy in Rome the debit card switch for not much over cost and these are the types of things that happen routinely in the group. We have similar discussions. We have regional discussions, Africa, Indian subcontinent, etc. and there are topical discussions, such as unified messaging, or callback (10 of our node owners are callback agents) and we want to develop our name as a global brandname. And I think that is really important. Because I think when retail customers see a global brand they feel more comfortable and they think you are a serious organization. I want to harp some more on the issue of group consensus because I was struck very recently by an article in Data Communications magazine this week about Global One the Sprint, FT, DT alliance. And the article was about this whole issue of not having controlling legal authority. You would think these large companies are on the up and up. The article was saying that Global One was saying we had a profit of $1B and the president quit for personal reasons and analysts are saying that Global One really had a loss of $800M and the president was fired. And end-users are really getting nervous. And the article asks "how do you run an international alliance? There is no controlling legal authority"

Well, one of things we discovered is that the fear of losing face in front of the others, in front of the group, is a far more frightening prospect than the prospect of being sued because if other people in the group see that you are greedy or selfish, basically you can get cut out of the least cost routing table and poof -- you don't exist, you are gone. So what happens in practice is that the group tends to elicit, what we have discovered as a group, very high quality social interaction, people are very self-initiated, very self-motivated, they wind up contributing energy. Our logo was done by a node owner he contributed it, and everyone sees the logo and says "Oh it is such a beautiful logo" and people wind up offering themselves because of the group dynamic. And another side effect is that it moves very rapidly. We probably have 3 broadcasts per week, somebody is always broadcasting something or responding to something with a cc to everybody so there is a ton of emails, that are flying by and it makes us move quickly, especially with the use of the teamware and the ability to vote, so you wind up moving on "Internet time". And the reason is that I never say to anyone or can say to anyone, "you have to do such and such" because I could never force anyone to do anything anyhow.... it is always the carrot.. you always have to entice people to get things done and that is the group dynamic.

Questions

Q: Are you doing real-time fax over the public Internet?

Yes, let me address that, thank you,

The fax-to-fax is store and forward in its initial deployment. We will not do real time fax because 75% of our guys are in 3rd world countries and you are just not going to get the pipes there. So the way store and forward fax works is that we guarantee delivery say in 30 minutes. Actually, it delivers in 1 minute. But if there is a lot of traffic, the public Internet itself becomes a queuing mechanism, and you can stuff a lot of faxes into that queuing mechanism. And most of the people in 3rd world countries are starting off with 4 line analog systems.

Now for phone-to-phone it is a very interesting situation. Those people, even in 3rd world countries that have shelled out the money for a digital line for phone to phone, (and to give you an example, Argentina is $6,000 per month for a 64K line to the net), which only handles 5 conversations at once, well, what we have done is that we have designated that the 3rd world countries for phone to phone originate only, and the 1st world countries basically terminate only. It is a little restrictive but the guy who is in a 3rd world country does not want to receive traffic from a 1st world country, because he does not want to make 5 cents per minute or 10 cents per minute. But when he originates he may be making $1 per minute. When we tested phone to phone with our Ghana node, (he is the largest ISP in Ghana), the phone quality sounded like he was next door. But he originates only, he is outbound only, 1st world receives, 3rd world sends. Now this arrangement does not solve the problem, but it helps. In addition what helps is the way we market it. We tell the retail customers right up front that this is Internet. We say to them up front that the Internet is like the New Jersey turnpike. (laughter). Sometimes it is bumper to bumper and sometimes it is clear. And when we go to the customer and we want to prove to them that we are honest we say, look try making a call at 7 PM after dinner, at 4 AM and at noontime, and see for yourself that there is a time of day effect. Once you have the customer has demonstrated to himself that there is a time of day effect, he sees we are making a best efforts endeavor, and goodwill is generated, and the limits of the service are clear. Now mind you a lot of this would not cut the mustard in 1st world, but 3rd world is a different ballgame. People say how do you market in 3rd world? The way you market in 3rd world is "pssst, I have dialtone" (laughter). There is no need to market in 3rd world. The second people hear that you have dialtone they come to you, and we can get away with a lot more in terms of quality of service, in 3rd world compared to what would be acceptable in 1st world. Moderator starts to take questions for all 3 speakers

Q: One of the speakers spoke about fast connect time. How fast is that?

You are asking about the post dial delay?

We find it is between 2 and 8 seconds. The post dial delay is the time between your dialing the last digit and the time the starts ringing. We find it is faster than many international calls you place over the PSTN.

Q: This is for Al. You mentioned outbound traffic from 3rd world countries. Can you quantify that?

We just started our first commercial traffic out of Portugal a few weeks ago, and I expect Singapore, Greece, and Nepal to start soon. I cannot quantify yet because it is too early in the game, but you are raising an interesting point I forgot to mention, namely that there are a few 3rd world countries, that due to political considerations, are inbound only, most noticeably Pakistan and PRC, they don't dare go outbound. The inbound only nodes can charge what they want they are exempt from the 500% rule. It is a little too early for me to give you figures, I am sure the traffic volumes will get high, I certainly hope so.

Moderator

Definitely a lot of creativity here!

Q: This is for Al. Could you give us the address or URL again?

This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Q: This is for Al. What about variability on the Internet access fees?

Most people use analog dial up. They keep the analog dial up 24/7. If it drops it redials. Some are using WebRamp, this analog MUX that takes 3 analog dial up lines, and aggregates the bandwidth. Some of the countries do have per kilobyte charges, but most of the node owners are savvy enough to get around that so it is not a threat.

Q: Most of you are using PC based gateways. Do you see a shift to higher capacity embedded systems and what features would you like to see in those systems?

Of all the gateways I am aware of are PC based and the maximum capacity is 1 or 2 T's/E's, and you get more capacity by adding PC's. From my perspective I would like to see higher densities. Me I am pretty excited about the offerings from Ascend and Cisco and the people on the router side. In many of the countries the regulations make life easier if in fact you ARE an ISP yourself, so the whole possibility of having a router combined with a VOIP gateway in one box, is attractive to me. So in case Cisco or Ascend come knocking on our door and they want to offer us a package deal, I am all ears.

Q: This is for Al. What happens if someone originates and gets bad quality?

All the gateways that we use, the fax to fax we developed in house and the Array phone to phone gateway, before a call is attempted it pings, and it checks for latency, and it asks "is the Internet usable?" and if the Internet is un-usable, well right now it is a manual system where the caller will get a recording that says the Internet is unusable. In the near future, it will be automatic to go into a TCP/IP triggered callback. We are using successfully now a TCP/IP triggered callback from one of the node owners whom also is a callback operator. It works flawlessly. The optimum scenario will be you try to make a call or you try to make a fax and the lines are maxxed out or the Internet is un-usable, you get a bong, so you know you that instead of being on rate plan "A" over the Internet, you are on rate plan "B" over callback. A fallback to callback. Of course, in those countries where we don't have nodes to begin with, it is re-routed. Right now, it is re-routed through Sweden, and USA, depending on least cost routing. Q This is for all 3. Do you see a gateway that would support OC3 directly? Moderator Look for the large-scale gateway announcements.

Q: This is for Al. What is the average size of the gateways deployed?

3rd world, 4 port analog. UK, NZ, Germany, Sweden, HK, USA, Canada, T1/E1.

Q: This is for Al. Don't customers reject store and forward fax?

Store and forward fax is actually more common in 3rd world. India for example, has a PTT affiliated domestic store and forward fax provider. And my friends in Dhaka and Katmandu actually faxed me full-page advertisements in the newspapers of Dhaka and Katmandu of companies offering store and forward fax services. Many callers in 3rd world use fax as a poor man's voicemail; there is a higher reliance on fax relative to voice traffic, so it is far more acceptable. We would not use it here in 1st world, but in 3rd world it is not a show stopping issue.

Q: This is for Al. How do you deal with restrictive 3rd world regulations?

Basically we stay under the radar and/or we push the legal Grey area wherever possible.

Q: This is for Al. How do you deal with user identification and security?

The store and forward fax is encrypted and each node identifies itself to the other nodes via Node ID. The end user identifies himself to the local node with account number and password.

Q: What is percentage of worldwide traffic is fax? I heard 36%. What do you think?

I have heard that in the Orient it approached 50%.

Moderator

I would like to thank our panelists, Juan, Ofer, and Al.