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FWD relaunches to break the telco trance

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The media educator John Culkin remarked: “We don’t know who discovered water, but we’re certain it wasn’t a fish.” The observation summarizes why I recently pitched Jeff Pulver on relaunching FWD, the VoIP operator formerly known as Free World Dialup. (Disclosure: I am helping Pulver relaunch FWD.)

Though not as well-known as Skype or Vonage, FWD, now 12 years old, is the longest-surviving VoIP company in the world. From the beginning, FWD distinguished itself through advocacy efforts (e.g. FCC Pulver Order) and enabling tools (e.g. free SIP device registration), which helped the company attract some 700,000 registrations.

FWD does not seek to provide a communication service as much as empower amateurs to create their own communication solutions. The do-it-yourself ethic saves end users from waiting for the so-called experts to awake from their telco-trance and figure it out for us.

A decade into an Internet-enabled communications era, most communication offers remain bound by 20th century definitions. Consider the examples of SunRocket and the newcomer, Ooma. We can debate the technical innovation or pricing advantage(s) of their respective products, but both companies viewed the world through a telco lens focused on one thing: Getting a share of profits enjoyed by entrenched telcos.

The usual business theory that success depends on providing better value to consumers falls short in the case of telco startups. It fails due to two line items on the income statement: ‘marketing expenses’ and ‘COGS (cost of goods sold). Marketing is expensive because it’s hard to win customers.

New entrants like Ooma will spend far more on customer acquisition than incumbents ever have, because incumbents acquired their customers in a monopoly context and now need only invest in retaining them. Incumbents own the telephone network, too, which puts new entrants at their mercy for interconnection, inflating COGS. There are still more expense traps for new entrants that survive the marketing and interconnection gauntlets (just ask Vonage.)

The death rate of start-ups that touch the telephone network remains near 100%, but startups pursuing new ways to enable voice communication need not limit their efforts to improving the telephone call, because “communication” is not synonymous with “telephone call.” After all, a telephone call falls woefully short as an alternative to meeting someone in person. The audio quality of telephone calls compares unfavorably to even AM radio.

FWD sustains itself through a membership option to keep the focus on communication rather than billing systems. Ooma represents a step in the right direction. It trades the usual services model for a consumer electronics model, but the Ooma device still has to compensate for a ton of telephone network baggage.

The arrival of the Internet can release us from the limitations of the telephone network, yet so far we have been inexplicably unwilling to use this key to our freedom to venture outside the telephone network prison. Even as the experts tell us the price of a voice call will drop to zero, both AT&T and Verizon managed to enforce price increases in the last 12 months.

This is one reason why calling costs still leave two thirds of the world’s population with few, if any, communication options. Yet all this can change for those following FWD’s lead: Imagine a communication future as if the traditional phone network never existed.

13 Responses to “FWD relaunches to break the telco trance”

  1. @Erik

    Ed Guy is now Technical Architect at Truphone – the Mobile Internet Network Operator who provide a VoIP service on mass market phones.

    For those of you who know what Ed did for FWD it should come as no surprise that he has been and continues to be instrumental in bringing cool and fun features to Truphone!

  2. Ramiro Salas

    I’ve been with FWD for several years now (and now a “member”) and I managed to connect my whole family in Chile, USA, Germany and Italy using FWD. I bought Grandstream ATAs for them, created their FWD numbers, configured the devices myself and shipped them with clear plug-and-play instructions. It worked like a charm and everybody is happy.

    How was that a success? well, from my family’s perspective, it is a magic black box that just works. If you guys could somehow create a model where non-techies could just “order here” and you get everything preconfigured for their own personal environment, that would be a hook. Especially if you don’t need a computer on for the service to work (as Skype does).

    I suggest you make a deal with Grandstream and resell their adapters (including their new IP video phone) and have special web areas where you can market directly to families spread around the world, and other niche segments.

    Old people makes a better market than young IMHO…

  3. Erik Tynwald

    I have been a FWD user ever since it’s inception (first time round). For me the one individual who made FWD exciting and innovative was Ed Guy – Jeff Pulver’s late CTO. When Ed was moved from FWD to other work within the Pulver empire, the really fun phased of FWD’s evoultion stopped dead.

    I would dearly like to kow exactly what Ed is doing now – a standard Google search reveals that he is in some way connected with mobile internet startup Truphone, who are doing all kinds of interesting stuff in the mobile VoIP arena (in the same way that FWD used to do really cool stuff!)

  4. Sampath,

    I share the sentiment that a focus on victimization of little co’s by big co’s is unproductive. The column represented more of a cautionary tale pointing toward a way forward. Avoid any dependence of on the traditional telephone network. The bigco anti-competitive activities explain the surprising lack of innovation in traditonal telecom. Aside from a difference in connectors, a telephone manufactured in 1924 will work with the existing local telephone networks. The same voice quality. The same technology used in the local loop. The usual forces of technology innovation appear to be absent in the monopoly local telephone business. It seems reasonable for anyone getting into the business in 2007 to think through how that could be possible. How did the Verizon increase prices every year between 1984 and 2007 without improving the value proposition offered end users? The telephone call to your neighbor in 2007 differs not at all from the one in 1984 or even 1954.

  5. Michael Graves

    I’ve been with FWD since 2001. Working from a home office in Texas for a UK based company I managed to get our staff to try FWD a little before it was truly ready.

    SIP through NAT was not really solved well until quite recently. Skype drew attention to the need to resolve that problem. Gizmo Project has done a decent job of making it happen, but FWD has remained under the radar for most people.

    With some press, and a little better reliability, FWD could be really good. I’d look to FWD for services and features beyond simple POTS replacement before most others.


  6. Sampath

    Success and failure has nothing to do with the big telcos…It has to do with the fact that these products are complex to use, no one to complain to and marketing to subscribers costs $$$….We just have to stop blaming the “big companies” everytime a smaller company fails…

  7. This is certainly an excellent move by Jeff and the rest of the FWD team. If anyone can grow a long term successful IP communications company that actually provides value to it’s users it is him.

    The idea that it is a membership, not a monthly fee sort of makes you feel like you are in an exclusive group. Great marketing.

  8. FWD always sought to help the IP Comms industry overcome the obstacle of the day. Over the years, this included the first PSTN interconnect, H.323 interoperability, promoting SIP with free provisioning, obtaining regulatory clarity via FCC Pulver Order, and recently taking a stand on patent prior art.

    I believe the most pressing obstacle today is escaping breaking the dependence of the industry on the traditional telephone network (and by extension on traditional telephone companies.)

    The network effect works against the industry at this point. Everyone wants ubiquity, but ubiquity seems to depend on interconnection with the telephone network. End users only understand new offers to the extent they get presented in the context of replacing traditional telephone offers.

    The column made a single point: There is more to communication and even voice communication than the telephone call. The IP Communication industry needs to get in the business of delivering communication rather than just telephone calls via the Internet.

  9. techuntangled

    One of the reasons FWD hasn’t done well is that it hasn’t been marketed to beyond the techie who’s willing to tinker with a VoIP box to get it to work. Reality is that marketing/buzz/hype is a very important tool in the success of a tech business