The Voice Over Broadband Wave is now beginning to lift off. The plain old telephone service providers are in for more bad news as they are about to get hit by a wave of defections that could make the migration to wireless seem tame. Now we have a way to ride the Voice Over Broadband Wave—8x8 Inc. (NASDAQ: EGHT). Many of you have heard of the Vonage VOB system but not as many have heard of 8x8. This is going to change, fast. The VOB business wave is now starting to swell, and the technology is now 98% as good as wireline. “It’s beginning to transition from something only a real Internet-savvy person would do into something ordinary folks can do,” said Jupiter Research analyst Joe Laszlo in a USA Today article earlier this year. This is the key. It’s now a service for non-nerds. The number of U.S. households making Internet calls with standard phones is expected to grow from about 100,000 now to 4 million in 2007 according to In-Stat/MDR figures from the same story. We expect faster adoption -- 6 million users by the end of 2005. The only catch to using VOB is that you need a broadband connection, which costs about $40 a month and is readily available across the nation. (Jupiter projects these connections will double to about 40 million in 2007.) Best of all, your grandmother could use the service and install it herself. Another Beneficiary of Number Portability Now, thanks to number portability, you can switch your home number to VOB—that’s BIG. With 8x8 you pick up the phone, hear the dial tone and dial the telephone number of your choice. There are no extra numbers to dial or special routines to follow. It’s that simple. You don’t have to be an engineer to use it. And look at the pricing: $19.95 for all-you-can-eat long-distance across the U.S. and Canada; $49.95 for unlimited international calling—unbelievable. Many immigrants or other foreign visitors in the U.S. spend $250–$400 a month calling home. The company also offers unlimited Packet8 VideoPhone service for $19.95 per month, which delivers high-quality, full-motion video and clear, delay-free
audio connection for both residential and business customers. How It Works You can be up and running within minutes of receiving the 8x8 package. They send you everything you need to get phone service, right down to the extra cable wire. Best of all, there’s no technician, no wiring in the walls and no technical experience needed! Setup usually takes less than five minutes. In more technical terms, 8x8’s Packet8 service uses the free phone adapter they send to customers to convert their voice from an analog signal to a digital signal. The digital signal can then be sent over a high-speed Internet connection because it is recognized as data. When someone calls, they dial a regular phone number. Behind the scenes, the number looks very much like an e-mail address. This number instructs the call to travel over the Internet and through the network to the phone adapter, the phone rings, and it’s no different from a regular call on the current networks. This is proven technology. Long-distance companies have used VOB’s cousin, Voice over Internet Protocol (VOIP), to transmit many of their calls since the mid-’90s, and about 10% of international calls used the technology. Plus, prepaid calling cards that charge a few pennies a minute use VOIP networks. Counting the Profits Given 8x8’s focus on business and residential phone service without the distraction of video conferencing, the business really rolls. The VOB wave is beginning to attract normal people—not just the tech-savvy early adopters. This is the kind of ten-bagger I love! We want to ride the VOB wave with 8x8. Buy EGHT under $2.00. VOIP — The Big Picture While 8x8's focus is on end-user household and small business VOIP service, we've got another company that provides the necessary equipment to help build and maintain large networks. Sonus Networks (SONS) makes hardware and software that public network providers -- including long-distance carriers, ISPs and cable operators — use to provide voice and data communications services to their subscribers. According to our latest ChangeWave Alliance Corporate VOIP survey, 25% of respondents say their company currently deploys VOIP. Significantly, another 21% say their company is considering deploying a VOIP system/application. Of those respondents whose company is using VOIP, 38% say they are using it as a replacement for traditional phone service. Another 21% say their company will increase spending on VOIP applications/equipment in the next six months, and 12% say they are considering an increase. Our latest ChangeWave Alliance VOIP and Consumer Home Telecom Survey results show home VOIP use surging in both the local and long distance telephone markets. A total of 14% of respondents now use VOIP at home -- double the amount in our September 2004 survey, while another 22% plan on using it within the next year. Importantly, VOIP is no longer considered a supplementary home phone service -- half of current VOIP users now report they use it as their primary or only home telephone service.
