Case Study I-2 • VoIP2.biz, Inc.: Deciding on the Next Steps for a VoIP Supplier 133VoIP2.biz’s Differential Advantage
In a May 2006 presentation to a local venture capital com-
pany, Milkowski listed the following reasons why
VoIP2.biz would be successful in the market:
“VoIP2.biz sells only to the business market. The big
competitors (such as Vonage) are primarily targeting
the residential market;
“VoIP2.biz focuses on the small and midsize business
market where most of the competitors are not playing.
We focus on the 20 to 100 line market primarily but
will go up to 400 lines when an opportunity arises;
“We understand that delivering VoIP for business
customers is not about saving money on long dis-
tance. Their long distance expense is typically only
5 to 10 percent of their telecommunications budget.
VoIP for business customers is all about consolidat-
ing their networks and utilizing commodity-based
technology to dramatically reduce their overall
telecommunications costs.
“We believe we are the first company to offer an
open-source VoIP IP PBX solution in the greater
Indianapolis marketplace. We expect to be the best
throughout the Midwest. The only competitors with
a solution close to ours operate in New York,
Atlanta, and California.
“VoIP2.biz’s offerings are unique in that the company
addresses the entire communications systems needs
of its clients—from handsets through network
connections.
“We believe our use of an open source platform instead
of reselling a proprietary PBX manufacturer’s product
results in the customer realizing a savings in both the
technology acquisition costs and in the ongoing
operating costs of an IP PBX.“Finally, our cost structure allows us to deliver a new
PBX solution (the most popular alternative for these
customers) cheaper than our competition as this chart
indicates (see page 134). If you review the chart for
several competitors, it is clear that VoIP2.biz offers a
strong product in our target market. For both small sys-
tems (25 users) and for larger systems (200 users), our
total cost of operation (TCO) per user at list price is
substantially below all the known competitors...and
the same is true for just the initial investment and for
the ongoing cost with maintenance.”The Competition
In early 2006, management conducted an analysis of com-
peting voice communication solutions offered to business
customers. The results of this study were summarized in a
report to the board of directors in April 2006:- National Hosted VoIP Solution Providers:Starting
with organizations like Vonage, these business entities
use a national IP transport network to offer business
customers low-cost long-distance service. Analogous
to cellular phone service, these implementations are not
integrated into the business’s existing telecommunica-
tions environment. Through data gained by manage-
ment, these providers are experiencing problems with
the lack of data experience in their channel partners and
are having difficulty in dealing with customer concerns.
Representative companies in this group include http://www.
vonage.com; http://www.packet8.com; http://www.broadband.com;
andwww.broadvoice.com. Generally, these systems are
priced from $29.95 to $40.00 per line per month, plus
installation fees. Some market participants provide
Internet access and sell telephone handsets. - Incumbent Local Exchange Carriers (ILECs):
The ILECs, principally AT&T and Verizon in
VoIP Implementations
Residential CommercialImplementation Type Hosted Hosted System VoIP2.biz
Phone Number Vendor Vendor Customer Either
Phone Either Either Vendor Either
Local Network Customer Customer Customer VoIP2.biz
PBX — — Vendor VoIP2.biz
Premise Switch / Router Customer Customer Customer VoIP2.biz
Wide Area Network/Internet Customer Customer Customer VoIP2.biz
Long Distance Vendor Vendor Customer VoIP2.biz
Public Switched Telephone Network (PSTN) Vendor Vendor Customer VoIP2.biz