December 12th, 2005
Here's what the BellSouth-8x8 deal means
On Friday, BellSouth announced that it is teaming up with 8×8 (best known for its Packet 8 VoIP service) to provide $20 a month VoIP service. Subscribers will get free calling to anywhere in the U.S. or Canada,as well as discounted international calls, voice mail and caller I.D.
Until I thought this move through, my first reaction was "why are these companies cannibalizing their own existing services? As stand-alone, full-featured consumer-grade VoIP, 8×8’s Packet 8 is a pretty good deal. And why would BellSouth offer VoIP and thus, compete with its own calling plans.?"
Then I parsed it all in my head. This is a proactive defensive move for both parties.
BellSouth has already seen the analyst reports that predict sharp growth for VoIP, and realize that to compete against other triple and quadruple-play VoIP service offerings from the likes of Comcast, AT&T, Time Warner Cable, telco rivals and IMs-gone-VoIP, they need to offer their core customers a VoIP alternative if they want to keep them around.
8×8, meanwhile, is playing CYA and realizing that it will be increasingly difficult for standalone VoIP providers such as themselves and Vonage to compete against the giants and their multiservice offerings. So, rather than go it alone, or sell out to one of the major multi-servicers, 8×8 is offering themselves as a service provider to the service providers.
What’s more, 8×8 gets to sell their own equipment, as well as oversee customer service, fulfillment and billing. Although financial terms of the deal were undisclosed, common business sense would dictate that 8×8 gets a piece of the $20 a month action for account services, and also gets a nice share of net equipment sales as well.
BellSouth also benefits from not having to provide front-line phone-based customer service.
Still, it will be important for the Atlanta-based carrier to educate their CSRs enough about VoIP to answer the pre-signup questions that are sure to arise from newbies. I know the division of responsibility between what BellSouth and 8×8 offer customers on this plan appears clear, but we’ve all seen apparently clearly demarcated responsibilities get muddled up in the face of poor in-field execution and fulfillment issues that somehow fly below the radar of top execs at participating companies.
Poor integration between BellSouth and 8×8’s service components better not happen here, or else the Blogosphere, our Forums, and our Message Boards will be all over it.
Looking ahead, I’d be watching to see if BellSouth eventually builds their own VoIP technology. Would that end the 8×8 deal? With that in mind, does the BellSouth-8×8 deal have some sort of time parameter and/or sunset provision?
On a broader note, a deal such as BellSouth-8×8 makes it more imperative for other standalone VoIP providers to find a big telco or cable partner.
A big telco or cable partner to line up with, or sell out to.
Russell Shaw is an enterprise computing journalist, analyst and author based in Portland, Oregon. See his full profile and disclosure of his industry affiliations.
