Jajah Touts No Frills Wireless VOIP

VOIP service provider Jajah Inc. plans to move away from its mostly PC-based service and onto mobile phones in the next few months, according to the company’s CEO, Roman Scharf.

The Mountain View, Calif.-based startup differentiates itself by not forcing folks to stay connected to their PCs while talking to friends, relatives, etc. Callers use the Jajah Web to initiate calls, but the service calls and connects both users on their regular landline phones. “People are comfortable with their phones; they use them everyday,” Scharf says.

Also, the service can be used without downloading any software client to the PC. It's all done via the Web browser.

Soon it will go a step further by taking the PC out of the mix altogether. Scharf explains that his company will create a piece of Java software that can be downloaded by Web-enabled phones. This code will allow that phone to set up and participate in Jajah calls. (See Spirit Tackles Mobile VOIP.)

Most Web-based services are now finding their way onto the small screens of cellphones, but this particular service might hurt the long-distance businesses of the operators that subsidize those phones. “Whenever you need to make a long-distance call or an international call, just switch over to Jajah mode and it’s much cheaper,” Scharf says. (See iSkoot Connects With Skype.)

Until March, Jajah was just another PC-based VOIP service like Skype Ltd. (eBay Inc. (Nasdaq: EBAY)) and Google (Nasdaq: GOOG) Talk. But Scharf says he had a moment of clarity when market research suggested that 97 percent of computer users still don’t use PC-based VOIP services. Then the company reworked its service to allow for folks to use regular phones -- even though the calls themselves are carried over the Internet.

Once a call is initiated at the Jajah site, the Jajah “termination server” places a call to each party, then connects the calls together. Jajah operates 200 of these servers in 85 countries.

The same process will take place when a mobile handset is being used to initiate the call. The cellphone users on each side will be charged by their providers for what appears to be a local call -- even if they are using the Jajah service to connect to a foreign country. And, as with the PC-based service, most of the call will route through the Internet, connecting to the PSTN only when necessary.

Scharf says his company has low overhead and is making its money from fees for VOIP calls and text messages. But the company, once it gets users hooked on its telephony services, will start rolling out higher-margin services (conference calling, etc.) as time goes on. He expects Jajah to hit break even toward the end of this year.

The traditional phone companies are totally left out of the mix here. For that last-mile PSTN connection, Scharf says his company buys high volumes of minutes from wholesalers like Global Crossing (Nasdaq: GLBC), AT&T Inc. (NYSE: T), and Level 3 Communications Inc. (Nasdaq: LVLT), and recoups the money (and a small profit) through small fees to Jajah users.

But what the phone companies will soon be missing is the higher charges they could collect from international calls, especially those placed by cellphones.

It's also worth noting that investors are standing behind Jajah's leap from PC to regular phones. The company received a $3 million infusion at its launch in October 2005 from Sequoia Capital and another investment of $5 million from Globespan Capital Partners in March.

The company now employs 50 people, Scharf says.

— Mark Sullivan, Reporter, Light Reading