Rich Tehrani, Editor in Chief at TMC and prolific VoIP industry writer, penned a recent post with some thoughts on MagicJack, current industry media darling and scourge of ITSPs everywhere.

Tehrani gives MagicJack high marks for their marketing campaign and product branding. I agree, they have done a good job of getting the word out about their service.

Rich also gives MagicJack props for letting their freak flag fly, daring to include mention of the technology gears behind their service and not hiding in the closet from an often VoIPoPhobic consumer audience. Heck they even modded the USB stick ATA so you can see the board, chips and circuits inside.

So I’m reading Rich’s post and nodding in agreement right up until the end, when he remarks:

I suspect we will see more companies doing similar things and packaging their products in a like fashion and switching to pricing plans that are very close to this offer.

I disagree here. One fact missing from the analysis of MagicJack is that their business model is built off the idea of subsidizing their service delivery costs by borrowing a monetization strategy that is the foundation of most web services…..ADVERTISING!

Rob Beschizza at BoingBoing Gadgets peeks behind the curtain and sees that the devil is in the details, and that privacy advocates are not likely to be signing up for MagicJack anytime soon.

From MagicJack’s EULA (End User Licensing Agreement):

“You also understand and agree that use of the magicJack device and Software will include advertisements and that these advertisements are necessary for the magicJack device to work … Our computers may analyze the phone numbers you call in order to improve the relevance of the ads”
…
Any claims, legal proceeding or litigation arising in connection with the magicJack device or Software will be resolved by binding arbitration … in Palm Beach, Florida.

Hmmmm…..”Our computers may analyze the phone numbers you call in order to improve the relevance of the ads”….

Does that allude to geo-targetting of local advertisements based upon area codes dialed? Or something more sinister like packet sniffing and keyword targetting based on actual conversation snippets from private phone calls?

I don’t buy the notion of consumers buying into ad supported phone service at a massive level, creating a trend that would shape the overall industry. That’s just my opinion, and I may be called out for it in the future and I’m willing to take the heat for it.

I wrote about using MagicJack to emulate POTS service with an IP PBX last year. At least one of our readers was working on gaining access to MagicJack’s SIP proxy in order to bypass the need for their USB dongle.

iLocus predicts an IPO or acquisition of Digum within 12 months.

Highlights from the article include:

Asterisk Open Source PBX currently downloaded an average of 3000 times per day.

Digium claims to have recently had their 26th consecutive profitable growth quarter.

Digium has shipped over 4 million gateway ports to date.

Digium sales are allocated approximately 52% North America, 25% EMEA, 23% APAC and CALA.

Nearly 45% of all Asterisk downloads these days come from Europe.

According to Digium, there are roughly 3.5 million to 4 million Asterisk servers deployed worldwide.

Digium estimates 110 million end points are connected to Asterisk systems.

Service providers who have built production services on Asterisk accounted for over 6 billion commercial VoIP minutes in 2007, and that volume is expected to double in 2008.

Digium claims 900k IP Phones were added to Asterisk based service provider systems in 2007, excluding the self-managed Asterisk networks of enterprise users.

Digium plans to address scalability issues in the short term.

The remainder of 2008 will certainly not be without drama in the OSS telephony industry. OpenSER, recently re-named Kamailio Project, and FreeSwitch both have aspirations to unseat Asterisk. OpenSER is more widely deployed in the service provider/carrier space, and accounts for more wholesale minute traffic according to iLocus. FreeSwitch have recently aligned themselves with Sangoma, a fierce competitor to Digium in the TDM hardware space.

ISP Planet has a list of the top ten VoIP providers ranked by total number of subscribers, with data current through May 2008.

1 – Comcast – leads all providers with 5.2 Million subscribers.

2 – Time Warner Digital Phone – 3.18 Million subscribers.

3 – Vonage – 2.61 Million subscribers.

4 – Cox – 2.46 Million subscribers

5 – Cablevision – 1.685 Million subscribers.

6 – Charter – 1.085 Million subscribers.

7 – Insight Communications – 204,000 subscribers.

8 – Mediacom – 204,000 subscribers.

9 – Surewest – 54,000 subscribers.

10 – CBeyond – 36,000 subscribers.

As you can see, amongst providers reporting their current number of VoIP subscribers, the list is comprised almost completely of cable providers,with the exception of Vonage and CBeyond. For that matter, I’m not sure CBeyond really belongs on this list, since they do not offer residential VoIP services, but rather focus on delivering converged voice and data to businesses.

I wrote two weeks ago about Ribbit, the next generation phone service provider getting purchased by BT for a reported $55 million, but it now looks as if the company received $105 million. The deal took a few weeks to finalize (not that it is indicative of anything) and when ti was officially announced, the total amount paid by BT had almost doubled. This isn’t just good news for telecommunications entrepreneurs, but in many ways it is “validation” that the voice 2.0/ teleco 2.0 era is upon us.

Many will debate the price paid for Ribbit and the fact that they do not have any revenues (yet), but to a company like BT $105 million is a drop in the bucket compared with the potential return that the Ribbit technology platform could bring them. It will be very interesting to see if BT will “close-up” the platform or keep it open; monetizing it by giving businesses the ability to easily create telephony applications.

A Game of Open Source Cat and Mouse

As open source telephony continues to make its ascension as a legitimate threat to legacy systems vendors an interesting game of cat and mouse is developing between the various PSTN connectivity vendors.

Not a press release goes by without an eventual answer from a competing company and I doubt that the latest announcement from Sangoma that they will be powering FreeSWITCH, an open source telephony platform designed to facilitate the creation of voice and chat driven products scaling from a soft-phone up to a soft-switch, will go unanswered by their competitors. Now most consider hardware to be a bit of a yawn (and I tend to agree), however this announcement marks another notch in the belt for Sangoma. Sangoma, who just a few short years ago was a distant number two in the open source PCI card space to Digium, now finds themselves a gobbling up market share thanks in large part to partnerships with the various open source telephony platforms – all of which was created, thanks in large part to Digium.

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