Panasonic, deltathree Partner on joip, a New Approach to Consumer VoIP

They buy the phone; it comes with the service. Then all you have to do is get the consumer to try it out.

By Adam Stone | Posted Apr 2, 2008
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At deltathree, these days, it's all about disintermediation—eliminating the middle man.

Despite ongoing business relationships with dozens of service providers and VoIP resellers, the Internet telephony solutions company recently unveiled its own direct-to-consumer offering, joip.

"When you get the consumer yourself, then you have the power," said CEO Shimmy Zimels.

Founded in 1996, the New York-based firm provides integrated VoIP telephony services, products, hosted solutions, and infrastructure. Although it entered life as a consumer play, deltathree quickly switched gears, approaching potential customers through relationships with Verizon, Alaska Telecom, RCN, and others.

The company has since shied away from the consumer market primarily due to the high cost of acquiring new customers, Zimels said. With joip, though, it may have found a way around that problem.

Here's how the program works. Panasonic is bundling the joip telephony service with its GLOBARANGE hybrid landline/VoIP phones (which sell for between about $50 and $130 retail, depending on features). Consumers who buy the phone will find in the box brochures, explanations, and invitations urging them to plug in the included joip cables.

Once plugged in, a consumer can immediately call any other joip user for free. To call outside the joip network, a consumer would need to sign on to a joip calling plan.

Zimels says these plans will cost substantially less than those offered by traditional telecom providers. (He did not give a detailed comparison, citing the complexities of pricing across multiple plans in numerous nations, but click here to get rates to specific destinations.)

All this is intended to entice the consumer who may not have VoIP in mind at the time of purchase. The built-in VoIP capability of the hardware, the explanatory literature, the free calls, all are supposed to offer easy entrée into the system.

Zimels says the tie to Panasonic is a key component in deltathree's effort to bring down the cost of roping in new users. "People know the Panasonic name, they are respected, and now the minute Panasonic sells that phone we make a great leap in terms of acquiring that customer."

It has taken two years of development for deltathree and Panasonic to work out the mechanics of the joip offering. "You need to make sure the phone is seamless with our network, so the customer can essentially turn it on and it works. And it has to work properly in different countries. Then there are the regulatory requirements in each country, which also required a big effort," Zimels said.

All this effort, just to go straight to the consumer. But with friends like Verizon in your corner, one might reasonably wonder: Why go to all the trouble?

It's not just about acquiring new customers at less expense, Zimels said. The move to court consumers is very much about ensuring deltathree's own stability over the long haul.

"You can have a partner in Argentina paying $50,000 a month for your service," he said. Now a new player enters the field "and you can suddenly lose that $50,000 overnight. Now look at the consumer side. You lose one consumer, you lose $10 a month. You lose one reseller and you lose $50,000 a month."

No reseller represents more that 10 percent of deltathree's business, yet 10 percent still would be a painful bite, Zimels said.

Having joined the consumer fray, deltathree now must consider the end game: revenues.

Resellers are pushing to bring in joip users. Some in the U.K. for instance will sell Panasonic's joip-ready phone in pairs, with the second phone at half price, in the hopes of securing two joip users. Of course, deltathree doesn't get paid for those calls, since joip-to-joip calling is free. How then does the company make money?

It is all about the up-sell. For those who don't have a pal in joip, deltathree provides a test number for potential users to try the service. If they like it, and want to call outside of joip, they are asked to sign on for a calling plan.

So far most have chosen to pre-pay a small sum, maybe $20 or so, and then to upgrade from there, Zimels saide. Upgrade plans include voice mail, three-way calling, caller ID and international calls at low rates or in unlimited quantities.

With up-sell as the swing point, deltathree engages in an ongoing marketing push directed at those who buy the phones. The company sends text messages, coupons, e-mails, all aimed at driving consumers to upgrade their service.

The overall strategy could be described as casting a wide net. By packing joip in with Panasonic's GLOBARANGE phones, deltathree is looking for ways to get the product into as many hands as possible, in the hope of finding the subset who will take to the service.

"Telecom is a competitive space and you need to find the best common theme that applies to the most customers," Zimels said. With a powerhouse like Panasonic helping to put the service in play, "the chance is greater that you will build yourself a nice base over time."

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