Light Reading

Meet Voxox, the OTT CLEC

Sarah Reedy
10/22/2013
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Voxox is one of many over-the-top (OTT) messaging applications developers on the market, but where it diverges from its peers is that it's actually been a CLEC (competitive local exchange carrier) since 2008.

And today, it's adding "Android consumer app provider" to its resume.

Voxox applied for CLEC status -- a process CEO Bryan Hertz called a "huge regulatory pain in the neck" -- in order to support the company's B2B unified communications services. As a CLEC, it's able to provide free phone numbers on the PSTN as any operator would do, allowing its customers to make and receive phone calls and texts across any network. (See TelCentris Launches a CLEC.)

But Hertz doesn't see the other service providers as his competition. Rather, it's the slew of OTT apps from startups such as WhatsApp, Viber, and WeChat, which have attracted hundreds of millions of users between them, that are on his hit list.

Voxox entered the fray today with its own cloud-based OTT app for Android, as well as an update to its iOS app. The apps include voice, chat, video, social media, content sharing, and good ol' faxing from a unified interface. Users get unlimited free calling and texting with other Voxox users, and "super low rates" for calling and messaging contacts on other mobile networks or landlines.

Voxox's big advantage, and what makes it unique among the WhatsApps of the world, is the network interoperability it can provide, thanks to its CLEC status. Hertz is hoping that value-added functionality will also attract operators with OTT ambitions to become its partners.

Hertz says Voxox can offer operators a better quality of service than Skype along with the innovative flavor they're looking for as their core businesses get disrupted. It has already signed deals with several small carriers in Africa, but he says the company is in "various stages of the process" with around 50 other operators. (See The OTT Opportunity for Operators and Embracing OTT.)

"I think they are battling a force that won't be easily stopped," Hertz says of OTT apps, adding that they're generally more nimble, have different revenue-generation expectations, a single focus, and don't have to worry about cannibalizing legacy services. "It's difficult for operators who are used to buying technology from vendors like Huawei and Ericsson to be innovative and compete in the space," he adds.

Of course, Voxox isn't the only one promising to help operators get in on the action. Just this month, Sprint Corp. (NYSE: S) tapped Jibe Mobile to co-market its OTT app, and Genband Inc. acquired fring to help its operator customers build their own white-labeled OTT experience. (See Sprint Jibes With OTT Comms, Sprint Plots RCS-Laden Path to VoLTE , and AT&T Asks for a VoLTE Phone for Christmas.)

Hertz recognizes the competition is plentiful, but believes Voxox's CLEC structure, and the fact that it's not constrained to the rich communications services (RCS) protocol like some of its competitors, will help set it apart, especially as operators build out their voice-over-LTE (VoLTE) strategies. (See Verizon Beefs Up LTE Network, Nears VoLTE and AT&T Plans 4G Voice Launch This Year.)

"Cheap VoIP rates and features on top of the VoIP line that still have QoS will be very important in the future," Hertz says. "Technology is advancing to the extent that people are expecting better quality. If [operators] leverage it properly, they will have the advantage. We hope to work with them closely to bring the advantage to the end users."

— Sarah Reedy, Senior Editor, Light Reading

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SarahReedy
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SarahReedy,
User Rank: Blogger
10/22/2013 | 4:55:43 PM
Re: Nothing new, right?
Agreed about the money-making options, and Kruz added freemium as an option. I agree that LTE evens the playing field for quality too, but I think it's something users expect rather than want to pay extra for.
SarahReedy
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SarahReedy,
User Rank: Blogger
10/22/2013 | 4:53:38 PM
Re: Nothing new, right?
Thanks, WDudley. I'd suggest that there's even more opportunity in other parts of the world, especially developing regions, where SMS costs are high. Take a look at Silverstreet's recent infographic on it: http://www.lightreading.com/mobile/services-apps-mobile/the-ott-opportunity-for-operators/d/d-id/706112. Partnering with operators solves the phone number challenge and makes it a win-win for both, no?
Dries Plasman - Voxbone
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Dries Plasman - Voxbone,
User Rank: Light Beer
10/22/2013 | 3:34:14 PM
Re: Nothing new, right?
Hello Sarah. 

That's a good question. I see three options : the big ones surely count on an exit selling out to a giant like Google or Facebook, like Skype did with Microsoft.   A second option is advertising.  Others count on getting some part of the voice/sms revenues of MNOs, just like Skype does with "SkypeOut" and "Skype number".  That's what Voxox now is aiming at.   The last option requires the addition of a telephone number, which adds another benefit (on top of the ability to make money) : you're no longer restricted to calling only/texting other users on the same network, but you can reach everyone connected to the global telephone network.


LTE is important for the companies that opt for this third approach because you can only start making a lot of money if your communications service is as good as the one offered by the MNO.   Until today you can only use an OTT when on Wifi.  3G is not good enough for voice and video, it's only good enough for texting.   With LTE, OTTs get the same network quality for voice and video as the MNO itself, so they can compete almost on equal terms for the value added services on top of the data service.

Cheers

Dries

 

 

 
WDudley
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WDudley,
User Rank: Lightning
10/22/2013 | 2:43:35 PM
Re: Nothing new, right?
Good article - and nice strategy from Voxbone - essentially 'becoming your own CLEC.' To date, most of what I call the "NUVOs" (Network Unaffiliated Virtual Operators) or SMS-enabled OTTs use telephone numbers for their subscribers from one or more CLECs.  But between Pinger, TextPlus, TextMe, TextNow, HeyWire, Google Voice, and now Voxox along with a few others, there are probably in the range of 40-50 million subscribers across the US and Canada.  Most of these are well funded and making money.

In a way, the "NUVO" community is different than OTTs around the world.  By interworking with SMS, they have helped mitigate the decline in traffic for this market. They have also shown how it is a good idea to have both SMS and OTT (e.g. "IM" type) capabilities that work seamlessly.

The biggest impactor in terms of SMS traffic decline for the USA/Canada has been iMessage, with WhatsApp, Kik and others playing a much smaller role than in other markets around the world.

I totally agree that the ability of "NUVOs" to be successful in other countries around the world is very limited and almost 100% based on acquiring the supporting phone numbers as well as convincing the operators as these hybrid SMS/OTT players can help take away subscribers from the "pure-OTTs" (WhatsApp, Viber, etc).  It is not yet worth giving up on.

 

 
Kruz
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Kruz,
User Rank: Light Sabre
10/22/2013 | 12:55:17 PM
Re: Nothing new, right?
Viber for example has no plans in generating revenues from ads, but is rather considering partnering with operators or selling premium addons to the basic free service.
SarahReedy
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SarahReedy,
User Rank: Blogger
10/22/2013 | 11:51:53 AM
Re: Nothing new, right?
Thanks for the feedback, Dries. I do wonder how all these OTT apps plan to make money. I know some charge $1 or $2 in the app store, but it seems it's mainly ad revenue right now, at least in the US. How do you think the dynamics will change with LTE (and VoLTE)?
Dries Plasman - Voxbone
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Dries Plasman - Voxbone,
User Rank: Light Beer
10/22/2013 | 11:01:49 AM
Nothing new, right?
For years CLECs that have a wholesale activity offer access to telephone numbers to OTTs.   This benefit for OTTs of buying these numbers from somone else, is that they don't have to become a CLEC themselves in every country, a time consuming and expensive activity.  Especially as all OTTs have global ambitions.

Not a lot of (residential) OTTs have added phone numbers to their service.  Some did like Voxox, but the vast majority of them, such as Viber, didn't.

There are many reasons for this.   Making the service reachable from the PSTN makes the incentive lower join the private OTT community. Adding a phone number makes the service not entirely free anymore.  Residential OTTs do not have the ambition (yet) to become a substitute for the first line telephone service. And probably most importantly : the US is only of the only countries in the world where numbers supporting texting are easily available.   In the majority of other countries, mobile numbers are required to support texting and these are very hard to get.

Residential OTTs have two ways of making money at some point in time : advertising, or becoming the primary mobile communication service.   The latter needs (SMS-enabled) numbers.  And LTE...

 

 
SarahReedy
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SarahReedy,
User Rank: Blogger
10/22/2013 | 10:40:44 AM
Re: CLEC Advantage?
Yeah, if the FCC votes against the VoIP players, that'd be a big win for Voxox.

I thought it was interesting that Voxox is also positioning getting your own phone number as an advantage. I thought that having to have another one on top of your mobile number was annoying for consumers, but Hertz pointed out that in the BYOD age, a lot of people want to keep their work and personal separate. So maybe you use Voxox for personal and your carrier for work.

Although, in Voxox for operators, no new phone number is needed. That's just the consumer play.
SarahReedy
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SarahReedy,
User Rank: Blogger
10/22/2013 | 10:38:35 AM
Re: Another player in the game
It is definitely a crowded space for consumer apps. Voxox has a long history in the B2B space that it's hoping to leverage, but I agree that it won't be easy going to compete for consumer attention. At least it doesn't have the limitation of needing millions of users, since it works with any network (although it's only free Voxox-to-Voxox).
Carol Wilson
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Carol Wilson,
User Rank: Blogger
10/22/2013 | 10:26:22 AM
CLEC Advantage?
Interesting that gaining CLEC status is seen as an advantage, just as the FCC is testing whether to allow VoIP players to have access to phone numbers without being a CLEC.

Larger carriers say they are open to partnering with more nimble innovators but I'm guessing these folks need to get some traction with small and mid-size companies to build a track record that will attract bigger fish. 
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