Net2Phone Returns for IP, Round Two


Two years ago, Net2Phone Inc. — backed by high-profile companies like America Online Inc. and AT&T Corp. — plunged into the Internet-protocol telephony business.

But after a series of lab and field trials, cable operators dropped any plans for quick movement toward IP deployments. Cable telephony was confined to circuit-switched rollouts by AT&T Broadband and Cox Communications Inc.

In the interim, Net2Phone began working with Linksys Group Inc., a home-networking company, to sell IP equipment and services to broadband data subscribers.

Now, armed with several thousand subscribers and new backing from Liberty Media Corp., Net2Phone is back to pitching cable operators — and pointing out that their own subscribers are currently using their cable-modem connections for second-line telephony service.

The company also is toting a $20-million licensing agreement from Liberty, whose executive vice president, Tony Werner, is a former Net2Phone board member. Many analysts believe Liberty will enlist Net2Phone to roll out VoIP service on its cable systems in Germany.

In fact, Net2Phone may find its first cable-related deployments on foreign soil. The company conducted several now-closed VoIP trials with cable systems over the past 18 months, said CTO Jeff Skelton. The trials were both in lab and friendly-home settings, he said.

As those trials wound down, the company began conducting tests directly with consumers, offering $10 to $50 monthly IP-telephone packages with pre-paid phone cards. Linksys provides consumers with a home-networking router. Consumers can register for IP service via the Web.

The company has several thousand subscribers, said vice president of communications Sara Hofstetter.

"It's smarter for us to get consumers on board," she said.

Since many of those subscribers are cable-modem users, Net2Phone hopes to use them as a proof-of-concept with MSOs.

"We don't have the marketing dollars to market to the entire U.S.," she said.

Skelton said the MSOs he's talked with continue to ponder the best route into VoIP, whether that's a hybrid circuit-switched/IP approach or a forthcoming all-IP strategy.

"They haven't been shown a solution which makes them say, 'I have to do this right now,' " he said.

Liberty, IDT and AT&T Corp. own a 50 percent economic interest in Net2Phone and hold a 64 percent voting stake in the company. AOL Time Warner Inc. has a 6 percent stake and a 5 percent voting interest.

Initially, Net2Phone will concentrate on second-line phone service, although Skelton said the company is working on a PacketCable-compliant solution.

In any deal with cable, Net2Phone expects the operator to handle the access network and in-home technology, while it will provide the service. Skelton said Net2Phone would prefer to work with the media terminal adapter (MTA) that resides in the cable modem.