Optical/IP Networks

BellSouth Faces a VOIP Choice

VOIP provider 8x8 Inc. (Nasdaq: EGHT) could be in danger of losing its most high-profile customer after AT&T Inc. (NYSE: T) merges with BellSouth Corp. (NYSE: BLS). (See BellSouth Launches Residential VOIP.)

Three months ago, BellSouth began selling a re-branded version of 8x8’s Packet8 VOIP service. On the day the agreement was announced, 8x8 shares jumped 43 percent on the news. (See 8x8 Raises $15M.)

But AT&T has a residential VOIP product of its own, AT&T CallVantage, which could eventually threaten 8x8’s reseller relationship. As AT&T and BellSouth integrate, AT&T is expected to extend many of its vendor and strategy choices into the BellSouth network.

CallVantage may be part of a triple-play bundle offered to AT&T customers, including those in BellSouth country.

BellSouth spokesman Todd Smith tells Light Reading the decision has not been made on 8x8's fate. "I can't predict the future on what's going to happen," he says. "We're still continuing business as usual, and that's part of our offering." 8x8 won't disclose the terms of its agreement with BellSouth, but a recent SEC filing points out that 8x8’s distribution agreements generally “do not require minimum purchases or restrict development or distribution of competitive products.”

CEO Bryan Martin says in an email to Light Reading that the AT&T/BellSouth merger will not affect 8x8's business. Martin says the contract is "long-term" and includes clauses to guarantee that his company will profit.

Martin says his company's videophone functionality may keep it in the game at AT&T, as CallVantage is currently audio-only. (See 8X8 Adds Features, Router.)

But 8x8 wouldn't say how many BellSouth customers had taken its videophone service so far. In fact, 8x8 declined to release any numbers portraying the performance of its BellSouth agreement. The company says that, across all its customer base, about 10 percent of its customers use the videophone service.

8x8's Packet8 videophone service costs $20. Subscribers who sign up for a two-year voice and videophone contract can buy two branded, standalone videophones for about $400, according to the company’s Website.

8x8 shares were off $0.04 (2.40%) to $1.63 in late afternoon trading on Thursday. The company's share price has been as low as $1.03 and as high as $3.39 during the last 52 weeks.

At the end of 2005, 8x8 had about 113,000 VOIP lines in service, most of which were residential, while 15 percent were for enterprise customers. (See Insider Sees VOIP Battle Royal.)

— Mark Sullivan, Reporter, Light Reading

Sign In