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Inside This Issue ATA revival brings sophistication in product
1. ATA revival brings
sophistication in product
Back in the late nineties when Cisco, Motorola, and D-Link.
2. Tekelec acquires companies like Riparius, Quicknet, Motorola supports Vonage service
Net2phone and Innomedia came out and also supplies its ATA to some
3. VoIP opening Pandora’s with adaptors to connect ordinary major cable companies. D-Link has
box in Canada analog phones to the Internet for been supporting AT&T’s CallVantage
4. iBasis closes $31.5 million making voice calls, the industry did not offering. Cisco also provides its
in private placement show much excitement. The ATA equipment to many service providers
(analog telephone adaptor) they worldwide.
offered at the time, connected phones
over a PSTN dial-up link into the ISP As the device becomes more and
PoP. Therefore, no PC was required more sophisticated, many new
to make an Internet telephony call. companies have started to bring their
version of ATA into the market. Some
These adaptors are still being used in of them include Sipura, Arcturus,
developing countries. However, in the Linksys, Grandstream Networks,
developed countries where the Zoom, i2Telecom, VOIP Inc, eLEC,
broadband user base has grown engin, Packet8: the list goes on and
dramatically, ATA devices have seen on.
a major revival. Owing mainly to the
abundance of bandwidth at the edge Minor differences exist among
that was missing in the PSTN dial-up different ATA models. A common
scenario, the ATA device makers have trend is to move from a single port
re-oriented their products to meet a device to a multi-port broadband
For more information contact: growing demand for consumer voice residential gateway type product.
Rod Hackman over broadband services worldwide. Management of the device through a
Partner web interface is another area of
Many technical hitches have been development that ATA manufacturers
www.mercatorcapital.com solved including the method for have embarked upon.
handling voice in multi-protocol
environment and in particular the Grandstream’s product has a built-in
MGCP networks of Cable operators. router, NAT, DHCP server, FXS and
Security aspects, which are being PSTN port. The company started
Virginia Office: solved by Session Border Controllers shipping its product in March 2004.
One Fountain Square in carrier installations, are addressed Service providers that use
11911 Freedom Drive
by ATA devices by incorporating an in- Grandstream ATAs include the likes
Reston, Virginia 20190 built router. The in-built routers also of Primus, BroadVoice, Deltathree,
prioritize voice to give it a better SIPphone.com, Pulver.com
chance for maintaining quality. (FreeWorldDialup), SIPGate
(Germany), Europasstelecom (UK),
The new generation ATA connects a China Railcom (China), and China
traditional analog phone to a DSL or Unicom (China). The product has
cable modem. Vendors that dominate been found compatible with many
the ATA market include the likes of service offerings including those of
ATA Cont’d…. addressing that issue in the ATA instead, thereby
Vonage, Net2Phone and Go2Call. It is also
interoperable with a wide range of third party VoIP Certain companies operate in the market as
products from Cisco, Nortel, Siemens, Broadsoft vendors as well as service providers with the ATA
and Sylantro. device being the main product offering, on top of
which they offer voice over broadband service as
Arcturus develops SIPjack, the smallest SIP an ASP. These include Zoom, i2Telecom, VOIP
based VoIP telephony adapter. SIPjack is available Inc. and Packet8.
for license to OEMs, ODMs and carriers. Sipura
develops a two-port device that connects standard Linksys, now part of Cisco, recently announced a
telephones and fax machines to IP-based data relationship with Verizon to promote its new
networks. The device features include extensive product PAP2. The Phone Adapter with two Phone
programmability, security and sophisticated Ports (PAP2) converts analog telephone calls into
provisioning capabilities. Sipura started shipping digital packets that travel over the Internet. It also
the product (list price $120) in October 2003 to enables certain calling and call-management
service providers as well as select networking features for Verizon's VoB service. Vonage and
equipment distributors. AT&T have also announced that they will use a
Linksys device for their consumer VoB service.
The ATA products from Grandstream, Motorola,
D-Link have built-in routers. This enables the Riding high on the VoB wave, ATA device makers
service provider to offer improved voice quality by apparently have a huge market opportunity. VoB is
prioritizing voice traffic. Built-in routing also can being deployed all over the world. Incumbent
help solve a problem that service providers have operators are also introducing their own consumer
encountered in delivering VoIP service - the need broadband voice offerings. Recent regulatory
to penetrate computer network firewalls and to developments in the US, South Korea, and Canada
deliver phone calls to private IP addresses. Some have indicated that VoB will largely remain
carriers provide this functionality, known as firewall unregulated, thereby helping the service to grow.
traversal and NAT, by installing Session Border However, for ATA manufacturers, partnerships with
Controllers in their networks. But with ATAs having vendors and service providers will be crucial.
built in routers, service providers have the option of
Tekelec acquires Vocaldata million for fiscal years 2002 and 2003 respectively.
The vendor is one of the leading players in nextgen
Following the acquisitions of Santera and Taqua in
IP Centrex market along with competitors
VoIP space, Tekelec has embarked upon another
Broadsoft and Sylantro.
deal. This time the money is being spent on
acquiring Vocaldata, a leading IP Centrex feature
Vocaldata has over 50 customers worldwide which
account for some 250,000 IP Centrex lines. The
company has 20 additional trials in the US, a
Tekelec will pay $27.5 million for the acquisition,
handful in Latin America, and five trials in China.
consisting of $14.5 million of cash and
Vocaldata has lately focused its attention toward
approximately 780,000 shares of Tekelec common
China where some ISPs and emerging alternative
stock, or $13.0 million, based on the September 20
providers are involved in trials of the Vocaldata
solution. Japan’s NTT-Commware is by far the
largest customer of Vocaldata.
Vocaldata had revenues of $2.5 million and $4.8
VoIP opening Pandora’s box in Canada
Is VoIP altogether a new technology that calls for largely regulate itself, telecom start-ups such as
new regulations to govern it, or is it just an Comwave Telecom Inc, Primus Telecommunications
extension of a traditional calling system that can be Canada, and bodies like Canadian Cable
handled under the existing regulatory laws? Telecommunications Association, strongly favour the
regulation of VoIP industry by the CRTC in Canada.
This was the topic that generated intense
discussion among 33 participants at a public The Disagreement
hearing called by the Canadian Radio-Television While many companies feel that the current legislative
and Telecommunications Commission (CRTC) and regulatory framework will help to regulate VoIP
from 22nd to 24th September to discuss the issue of services in Canada and will provide a level playing field
regulating (or not regulating) VoIP calls in Canada. for competition, many others fear that regulatory set up
of CRTC would treat the technology as if it were a fixed,
The hearing attended by a plethora of telecom facilities-based, wireline telecommunications service and
companies ranging from communications giants hence could block competition or reduce consumer
such as Bell and Rogers, to high profile start-ups choices.
such as Telus and Vonage, brought to fore the
huge differences among various VoIP companies “There are clear distinctions between VoIP and
who have extreme opinions on the issue that is traditional telecommunications, and because
going to decide the future of VoIP technology in telecommunications regulations were not designed with
Canada. Internet telephony in mind, we express a real concern
that the wholesale application of common carrier
Only about 15,000 Canadians use consumer VoIP regulations to VoIP would have a chilling effect on
service, which is cheaper and more portable than a competition, innovation and investment,” said Brook
regular phone line. Questions remain, however, Schulz of Vonage, one of the pioneers in the consumer
about quality and access to emergency services. Voice over Broadband field.
The CRTC, presumably concerned about issues of Vonage, while urging the commission to leave the
security, protection against hackers, Local Number companies and the marketplace alone, also said that
Portability as well as 911 emergency services and regulation of Internet communications applications such
access for the handicapped is inclined to treat VoIP as VoIP is appropriate only when it is crafted to achieve
phone services like any other local phone service. a significant public policy goal that would not otherwise
be addressed by market forces.
“The commission is inclined to look at these
services, known as Voice over Internet Protocol or Vonage and Primus Canada are among eight or so
VoIP, as just a kind of updated phone service companies today already offering broadband telephone
which should be subject to the existing regulatory service to Canadian consumers who, using their regular
framework,” Charles Dalfen, the commission phone, can place calls through their high-speed Internet
chairman opined at the opening session of the connections.
Vonage’s view is seconded by phone giants Bell and
While players like Bell Canada, Telus, and Telus. Even though VoIP is a direct threat to their
Vonage have asked the commission to allow the existing local services, they are being compelled to enter
market to broadband voice market and would rather be allowed to
offer the service as a distinct category in order to escape
Canada Cont’d… short term, at least until the cable players and
telecom start-ups have a chance to establish a
legacy telephone regulation. Neither of these foothold in the VoIP market.
companies wants to sell a VoIP service for less
than $20 per month, for the fear of eating into “Competition needs to take hold first and once it
existing revenues. has, then we can begin to deregulate,” said Michael
Hennessy, president of the cable association.
Bell and Telus argue that putting shackles on
telcos, while forcing them to allow competing The Public Interest Advocacy Centre, speaking on
services on their own high-speed lines, does not behalf of a number of consumer groups, argued for
give them a way to protect their investment or tight control. Internet voice is "simply an
motivate them to keep investing in infrastructure incremental technological change," the centre said
and innovation. adding the commission does not normally abandon
regulatory requirements due to simple,
"Our fundamental belief is that the economic technological improvements in the name of
regulatory framework for VoIP must be built on fostering innovation.
principles that allow open, dynamic competition to
continue to flourish," said Lawson Hunter, Missing Mandatory Services
executive vice-president of BCE, the parent One of the issues that concern CRTC is whether
company of Bell. He added that VoIP without VoIP companies provide the necessary 911
regulation would encourage experimentation and services to their subscribers. The availability of
innovation that will produce the best and cheapest other mandatory services like legal Intercept and
services. Local Number portability services is also an issue.
The 911 angles are tricky, for instance, because a
“This is not telecom as usual. Sure we are big, but subscriber may tap into the Internet from anywhere.
forcing the telcos to file for price changes and If they call for help, how do you locate them? While
preventing them from bundling is not necessary in most companies said they are working on these
the case of VoIP,” added Hunter. problems, a full-fledged custom based solution has
not been provided by any of the companies
But the consumer groups, many VoIP start-ups and necessitating the CRTC intervention. Vonage has
Associations like Canadian Cable the necessary 911 services in place in virtually all
Telecommunications Association, see the problem of Canada. It uses a solution that correlates the
elsewhere. For now they support VoIP regulation nearest Public Safety Answering Point location to
because they fear that Canada’s two largest the IP address where the user logs in.
telephone companies would use their market Nevertheless, even Vonage is unable to provide
dominance to wipe out potential competitors in the the service to all its customers in Canada.
fledgling Internet telephony market if the
telecommunications regulator does not maintain Final Decision
firm control. After the hearings, participants will have until
October 13th to file comments with the commission.
“CRTC must not buy the telcos' argument that VoIP A decision is not expected before early next year.
is just another Internet application and therefore CRTC’s final decision will be controversial no
doesn't need to be regulated,” said a spokesperson matter what position it takes. Listening to the
from Canadian Cable Telecommunications hearing last week, most wanted to have the rules
Association, which represents industry extended, twisted or eliminated to serve their own
heavyweights, adding that the cable industry wants profit motive.
the CRTC to regulate prices and conditions in the
iBasis closes $31.5 million in Convertible Notes due 2007.
iBasis handles an estimated 400 million minutes of
iBasis has announced the closing of a $31.5 international long distance VoIP traffic per month.
million private placement in return for 15 million Teleglobe acquired its rival ITXC, which handles a
shares of common stock. The carrier intends to use slightly higher volume.
the proceeds for working capital requirements.
iBasis has recently launched a retail prepaid
The purchasers included several existing calling card service. The carrier has tried several
shareholders of the company and certain new value added applications throughout the last six
investors who previously purchased an amount of years of operation. It is one of a very few carriers
$29 million of the company's 8% Secured offering SIP termination.
Financial developments September 2004
Company Producs/Services Development Details
Vocaldata IP Centrex Acquisition Acquired by Tekelec for $27.5 million
Dynamicsoft SIP Application Server Acquisition Acquired by Cisco for $55 million
Raised $27.5 million to fund the acquisition
Artisoft IP PBX Funding, Acquisition of Vertical Networks
AccessLine VoIP service Funding Raised $6 million in funding
iBasis VoIP Wholesale Private Placement Raised $31.5 million in private placement
Viola Networks VoIP Test and Monitoring Funding Raised $11.1 million in funding
8x8 service Sale of stock Raised $12 million in proceeds
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