Interview with CJ Cherng, CEO, SeedNet

Taiwan has had a long history in VoIP. There were some early players like Wherever.net and Articula. Have the service providers in Taiwan been able to build on that early success of late nineties?

Ans: No, the services providers in late nineties did not achieve much success. Those companies went bankrupt because of the inadequate business model and the burst of the Internet bubble.

Taiwan is obviously a large hub for telecom equipment manufacturing. Have you sourced any part of your VoIP solutions from any local vendors or did you go for international vendors for all VoIP elements?

Ans: We sourced all of our major VoIP solutions - the H.323 gatekeeper as well as the CPEs - from the local vendors.

What are the factors that drive Voice-over-Broadband in Taiwan?

Ans:  VoIP technologies is mature now. At the same time the broadband access penetration is over 50% of the households. There is a decent level of market awareness (VoIP) among the public. Brands like Skype are well known and also well accepted by a large number of computer users. And finally I would say that the regulators view this as a positive development and are opening ways for VoIP as they deregulate the market further.

What has been your progress in Voice-over-Broadband in terms of the number of subscribers?

Ans: As of end of March 2006, SeedNet had over 65,000 subscribers in Voice-over Broadband. Out of that about 38,000 are residential customers.

You also work with a US company TelTel for PC based VoIP applications. How does the use of PC in Taiwan compare to the use of ordinary phone for VoIP?

Ans: ARPU in case of the use of ordinary phone is higher than that of softphone.  However, different products address different market segments and users. The advantage associated with the use of ordinary phone is obvious: the user does not have to change the calling behavior.

Chunghwa Telecom has been testing VoIP for a long time and has recently announced agreement with Nortel to deploy VoIP in various parts of their network including long distance and Voice-over-Broadband. How do you plan to compete with the incumbent?

Ans: We actually do not compete in the markets that the incumbent serves. Seednet, as a second largest Internet services provider, offers VoIP service as a value added service. We do not use it for areas such as international long distance etc. At the same time we believe that VoIP is the future of telecommunications.

Can you brief us on the competitors you have for Voice-over-Broadband in Taiwan including the cable companies? How do you take on the competition and what is the best selling point for your Voice over IP service?

Ans: We have TTN (Taiwan Telecommunication Network), APOL and some regional cable companies that compete with us in this market. However, as I mentioned we do not compete in voice over broadband in Taiwan. All the type II services providers consider VoIP as a value added services on top of their Internet access services. Seednet’s  best selling point for our VoIP services is cost saving on mobile phone calling which can bring savings of more than 30%.

How would you compare the VoIP market in residential segment to the enterprise segment in Taiwan?

Ans: They are the same in Taiwan, so far. Technology wise maybe they use different CPEs. The major appeal of VoIP to residential as well as the enterprise is cost saving and all the type II operators think the same.

What is your perspective about regulations on VoIP in Taiwan? Are the regulations encouraging for the industry or do you feel that they impede the growth of VoIP as a service in Taiwan?

Ans: Since the current VoIP services in Taiwan use non-E.164 numbers, that means users are not able to have inbound calls from PSTN or mobile at this moment. The regulator is however proposing to offer the E.164 numbers for VoIP with a prefix 070. All the VoIP operators are required to interconnect with PSTN and mobile operators, and also all the VoIP operators are also required to have legal intercept facilities available before securing a full license of E.164 numbering.

Looking at the VoIP regulations in the US, the FCC has made services like emergency number and legal intercept mandatory. If that happened in Taiwan too, what impact would it have on the voice-over-broadband market?

Ans: Implementing the emergency number is relatively ok in terms of the cost of the solutions. But the legal intercept will cost more, which we believe will impede the small operators in joining this market.

In your opinion, is voice-over-broadband mainly a driver for broadband take up, or is it here to stay?

Ans: We do not consider the voice-over broadband as a driver for broadband take up. In case of Taiwanese market, the broadband users are already over 3.5 million households. And many are not using VoIP. Skype users are the exception. We believe that the voice over broadband applications will be embedded in various kinds of devices, wired or wireless, in the coming years.

Any latest VoIP offerings from you?

Ans: Yes, we launched the VoIP-over-MPLS VPN for enterprises recently.

What is the future of VoIP at Seednet and in Taiwan?

Ans: Voice over broadband will not generate huge revenue stream for operators but VoIP services will be indispensable in future telecom services.