Is Bandwidth.com the Future of VoIP and Voice?

Bandwidth.com, despite having a name only a late ’90s investor could love, has built a profitable all-IP network and expects to bring in $85 million in sales this year. Today it also is announcing that it’s opening up its network as a platform for any business that wants to build out a voice over IP service — and it sees voice as merely a launchpad for even more communications services.

Todd Barr, vice president of marketing at Bandwidth.com, says the company has shifted its business to providing voice services over its platform as a way to boost margins. The newly launched FlexNet option for VoIP services will later be joined by new services for its business-oriented VoIP product called Phonebooth. Bandwidth.com also owns the FreePBX  graphical user interface that sits on top of open-source telephony efforts like Asterisk.

Barr did not disclose the 10-year-old company’s profits, but said that Bandwidth.com is profitable. So far Bandwidth.com is the back-end network for services like Voxeo, ifbyphone, OnState & Yext, which are using its FlexNet product. The network is set to deliver almost 4 billion minutes of voice service in 2009, with well over 1 million phone numbers, but perhaps its best client is one it can’t mention. Ardent users of Google’s telephone listing service GOOG-411 may recall hearing the name Bandwidth.com before some of their calls were connected, and it’s also a provider behind the Google Voice service.

Bandwidth.com may be experiencing success lately, but the company also is indicative of the future of voice. T.R. Missner, CTO of Bandwidth.com, points out that the company has no debt, in part because it didn’t have to build out a legacy copper network, and has the ability to invest in equipment and infrastructure where the demand is rather than by serving every place, all at once. As it opens up its platform and attracts more end users, it also gains an advantage in peering negotiations with legacy providers, a move that can take its costs down even more.

“Once you get millions of end points you have degrees of freedom to do interesting things like peering,” said Barr. “If you call another number in our own network and never hit the PSTN [public switched telephone network], there’s a lower cost, but if you hit the PSTN you have to pay everyone in the whole telco value chain.”

But it’s not really about voice. Bandwidth.com is using voice to get those millions of end points and some negotiating power — not to mention money for expansion. So far it has raised an undisclosed amount of funding from individual investors and financed its growth from its own sales. But the real excitement is about providing services in addition to voice, such as SMS or even presence awareness tied to a social-networking platform and your phone.

Building that type of network is cheaper, and means that Bandwidth.com doesn’t have to manage its network to meet certain regulatory requirements, which also adds to costs. For example, the network today only serves the continental United States. Many aspects of its network and business model map to the future I envisioned a few weeks back in a post called “The FCC Sees the Future — and It’s VoIP.” However, my friends in the copper world gave me flak for discounting issues like the importance of five-nines availability, and doubted that all-IP was the future of voice.

Maybe not, but the Bandwidth.com guys are happy to bank on that future with Missner saying that few people believe that five nines is the goal nowadays, and anyway, that aim is expensive to the point of being cost-prohibitive. Bandwidth.com builds redundancy into its network, which is built on Sonus gear and has three data centers where it connects to the public Internet in Dallas, Los Angeles and New York. However, if a server fails, the call is going to drop. The redundant network just means that when you try to call back it should go through thanks to the packets getting sent over a different route.

“In general we think of voice as an application rather than a utility service, and solve those [network architecture] problems in different ways that map to what people are doing today,” Missner said. With that in mind, his vision for the future of voice is pretty cool. He sees Bandwidth.com delivering “productivity as a service” and integrated into unified messaging, video and social networks, as opposed to voice or texts. BT is attempting a similar revolution after its purchase of Ribbit.

“We’re constantly looking at our future strategy, and we’re not going to tell anyone that being a VoIP CLEC is a 10-year business plan,” Missner said.

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