Interview with Shimmy Zimels, CEO, Deltathree

In terms of infrastructure you moved from VocalTec to Ericsson to Cisco. You must have gained a lot of experience evolving your network, what do you think are the prerequisites to run a large carrier VoIP network today?

Changes in our network were driven by technology and infrastructure improvements. What we learned over the years has little to do with changing the vendor platforms. VoIP is unique in the sense that it runs over an unmanaged network especially over the internet and there are many challenges for maintaining QoS. One of the most valuable experiences that we were able to gain over time is the expertise in dealing with QoS over public Internet.

Deltathree was one of the first companies to offer wholesale long distance phone to phone. Do you still provide VoIP termination for carriers or is that part of your business closed now?

We stopped offering that service in 2000. However we do offer wholesale VoBB service. The channels for that are mostly VoIP service providers or resellers world wide. We sell very little direct to the consumer. However even if we sell via reseller or service provider, we still manage for them the end users.

Did the success of Skype surprise you in anyway? You and Net2phone were in the market much before Skype had entered.

I don’t know if using the term surprise is right. Many other companies try to do what Skype is doing or have done in the past such as offering a peer-to-peer VoIP calling client. And they weren’t successful. For some reason Skype clicked. It could be that they came at the right time to the market. May be they had some product with technology edge which gave a little improvement but was able to change it from a failure to a great success. They definitely succeeded in a way they couldn’t think of.

eBay is integrating Skype with its auction process. Do you think that sort of application area for PC to Phone will catch on?

I am not sure exactly what eBay is doing but I don’t think they are going after the PC to phone integration. They are working at PC to PC integration expecting when some one goes to an auction and talks to the seller, and they can have peer to peer VoIP session. My personal feeling is that it would have a limited benefit because a lot of Skype users are not the typical eBay customers.  There are a lot of questions here. For example: are the eBay customers going to use Skype or are the Skype users going to do shopping on eBay etc.

VoWiFi is getting a lot of attention worldwide. You seem to be working with Telspace in this area. Can you brief me about this business model?

We definitely support WiFi devices. However we do not at this time have any significant relationship with hotspot providers to bundle the service together. We are doing something with Telspace along the lines of MVNO arrangement. Their customers are looking to offer subscribers complimentary services not only using the cellphone but also using the IP network for calling and we are offering the IP component of the service.

Why did you go for this model rather than offering consumer service?

It is still a consumer service. We just don’t have access to all the customers of the world so we work with partners that already have a consumer base and we use that customer base of theirs to sell them our product. For us it is a win-win situation. We share the revenue.

In this new business model of enabling cellular and VoWiFi service who do you compete with in the market worldwide?

We have a very good solution at the end of the day. We offer only the IP section of the business and that is something we have been doing for 10 years’ We definitely have the experience and the expertise to offer that kind of service. We are only focusing on the VoIP component of the service.

Which segment do you think is bigger for FMC right now, the enterprise or the residential?

I think the residential right now. Hopefully the enterprises will kick in because that is the bigger and the richer market place.

Why have VoIP pioneers like Deltathree and Net2phone not been able to build large scale businesses?

I disagree with your assumptions. I cant speak about Net2Phone but Deltathree is working on a very large scale. In our financial results disclosed recently we manage over 300 thousand subscribers in our network. We carry over 140 million retail minutes.

How are 300 thousand active users split up in terms of direct and indirect users?

We do not disclose the retail user numbers and those under the private label model.

Is the private label model sustainable over time since most large service providers prefer to have their own infrastructure?

The model is sustainable.

VoIP clients like those offered by yourself, Net2phone and Callserve used to come integrated with public IM clients like MSN and Yahoo Messenger. How far has that integration helped your business?

We don’t integrate with IM clients anymore. Today the only IM client we are integrating with is ICQ and we disclosed that relation several months ago and we are well developed with them.

Which direction is Deltathree going in and what can we expect from the company in five years from now?

We will be growing, and capturing market share.