deltathree – with award winning
technology and a unique revenue model
Services
Communications Services
NASD: DDDC
deltathree, Inc.
75 Broad Street - 31st Floor
New York, N.Y. 10004
Phone: 212-500-7704
Noam Bardin
President and
Chief Executive Officer
Interview Conducted by:
Diane Reynolds, Co Publisher
CEOCFOinterviews.com
July 2001
Bio of CEO
A co-founder of deltathree, Noam
Bardin is the visionary behind the company and chief architect of its global strategy. Mr. Bardin discovered Internet telephony while
working in the smartcard industry in Israel, communicating with his colleagues overseas
via PC-to-PC calling technology. As a
reaction to the poor call quality and the fact that telephones are more universally
available than PCs, he founded deltathree.
Mr.
Bardin served as Vice President of Technology and Chief Technology Officer for deltathree
before being named President and CEO in April of 2000.
He served as Global Network director from November 1996 to May 1997. Prior to founding deltathree he worked with
Ambient Corporations and served as an officer in the Israeli Special forces. Mr. Bardin graduated from the Hebrew University,
Jerusalem, Israel with a degree in economics.
About deltathree, Inc.
deltathree
is a leading Voice over Internet Protocol (VoIP) communications provider. Founded in 1996,
deltathree represents the forefront of innovation in new products, services, technologies,
hosted applications and research and development. deltathree’s early entrance in the VoIP space and the robust
feature set of their offerings have enabled them to build market share well ahead of other
VoIP providers.
deltathree
offers any business with a customer base the capability to provide VoIP communications
services that are "powered-by-deltathree." Each of its partners selects the best
applications for their customers' needs, while deltathree hosts the unique product suite,
effectively manages the customer base, and maintains a service infrastructure. This creates a powerful self-branded
communications channel for the deltathree partner.
The deltathree 'one account for all products' format gives their customers access
to all of the products they choose to sell. Each product can be packaged under that
company's brand and be resold as its own. Additionally, deltathree will provide the
company with the necessary tools to customize the product offering for their customers.
These services are the keys that enable the company to brand their communications products
effectively, as well as manage their entire customer base from a simple desktop browser.
deltathree has tailored a variety of programs for businesses to connect to, and
leverage, deltathree's hosted applications and privately-managed global VoIP network.
These
programs include the Reseller Program and the Network Partner Program, which represent
partnership opportunities for carriers and ISPs that choose to originate or terminate
traffic via deltathree’s VoIP network.
Meanwhile,
the Online Affiliate program enables Portals and other web sites to maintain a hyperlink
to deltathree’s consumer site, iConnectHere.com, and to receive commissions on users
that sign up from that link.
For
those companies with hardware devices, the Device Partner Program facilitates integration
of deltathree’s VoIP capability into their devices, and enables them to access
deltathree’s services.
All
deltathree programs include complete back office infrastructure with billing, fraud
protection, 24/7customer service, and more.
deltathree Products include:
PC-to-Phone
–allows
customers to call any phone in the world directly from their PCs, at great savings over
traditional phone calling.
Phone-to-Phone - enables
end users to make VoIP calls from any phone without the need for a computer or software.
Hosted
Broadband Phone Service
The Broadband Phone allows users to plug their regular phone into a broadband Internet
connection, providing all the basics of a conventional phone experience, with the enhanced
services only possible using IP, at a fraction of the cost of traditional phone service.
For broadband providers, private labeling Broadband Phone provides a clear advantage over
the competition, an additional monthly revenue stream, and reduced customer churn, with
nominal investment or risk.
Hosted Communications Solution
The Hosted Communications Solution customized package enables any company to become a
telecommunications provider by allowing it to bypass building the expensive
infrastructure, billing, and customer service systems that support it -- a major plus
since the company retains its self-branding status.
Unified Messaging Service - combines voicemail, faxes, and emails into a single user
account, accessible by phone or the web.
ClickIT - the e-commerce enabler, it allows visitors browsing a website to click
on an icon to speak directly with a representative.
CEOCFOinterviews: Please
explain deltathree to our readers.
Mr. Bardin: deltathree is a Voice over IP solutions
provider. We provide different voice over IP
products to various types of companies that in turn provide those products to their
customers. When I say Voice over IP, I mean
transmitting voice or phone conversations over the Internet or networks built on the
Internet Protocol. We have a suite of
products that we offer under two general models; the consumer model and the service
provider model. The first is under our own
consumer brand, which is iConnectHere.com. The
second, and larger, portion of our business is taking these products, services and
experiences we have built up via iConnectHere.com, and offering them to other parties
under their own brand name. We enable other
companies to provide Voice over IP services without having to own or manage any
infrastructure themselves.
CEOCFOinterviews: The
products that you have are under other company’s names.
Mr. Bardin: That's correct. We're a solutions provider. We have a platform, a network, and a product and
services infrastructure. We allow other
companies to lease that infrastructure from us and deliver the service under their brand,
without having to get into the complexities of delivering a telecom or voice over IP
service.
CEOCFOinterviews: So
then, these other companies are relying heavily on the service you are providing to them.
Therefore, you must have a very tight relationship with them.
Mr. Bardin: Correct.
It's a very tight relationship. One
of the things we bring to the table, which is very unique about our company, is the fact
that we have been running our own service directly. Therefore,
we know what it’s like to run our own service and we bring that experience to our
partners.
CEOCFOinterviews: Why
have you moved away from the traditional telecom revenue model?
Mr. Bardin: Well, for two reasons. First, we don't believe we will be able to achieve
profitability the other way. Customer
acquisition costs are too high. Second, we
don't want to follow the traditional telecom model because it doesn’t seem to work
well in the new environment. That is why
telephone companies are all trying to become something else. They are trying to change and move away from being
a true voice provider. To follow their old
business models wouldn’t make sense. We
believe service providers in the future will offer multiple types of products. They will specialize in customer acquisition and
customer retention while deltathree specializes in developing, implementing, and
maintaining the products.
CEOCFOinterviews: So,
you’re the company behind the other companies.
Mr. Bardin: Exactly.
Many of the companies we are working with today actually don't want us to be
on the front end, because they want to take credit for presenting their customers with
these unique products. That suits us just fine, as we are not concerned with owning their brands or their customers. Our primary focus is generating revenue through
partnerships. Someone else can take the
glory, as long as the partnership is profitable for deltathree.
CEOCFOinterviews: A
company you recently became involved with is MHL. Is
this one of your bigger partnerships?
Mr. Bardin: MHL is part of our Device Partner
Program. This is a program that we have for
different Voice over IP manufacturers. There
are many of them today from Cisco and 3Com to MHL.
They are developing the devices that enhance Voice over IP. It could
be IP phones, IP devices, or even VoIP solutions embedded in broadband routers or
switches. What we do is provide a service to
go along with the product. Today we are
seeing more and more of these devices. Manufactures are finding they need a service bundled with the
devices in order to sell them or and even to subsidize the other services they are
selling. MHL offers the deltathree services
whenever they sell one of their own devices. We
support them and they make a revenue sharewhile selling more devices. It's truly a win-win partnership.
CEOCFOinterviews: Are
you able to talk about any other partners that you may have?
Mr. Bardin: We recently announced Broadband Phone
trials with service providers in China, as well as a partnership with easyEverything, the
world’s largest chain of Internet cafes, which has implemented our Hosted
Communications Solution. There are many
others either testing or implementing our services, but we are not ready to announce those
partnerships just yet.
CEOCFOinterviews: Are you
relying on any one partner for your revenues or are you pretty much spread evenly across
the board?
Mr. Bardin: We're spread out across the board. For example, over thirteen service providers are
testing our Broadband Service right now. It's
very important for us to diversify our customer base as well as our revenue base .
CEOCFOinterviews: In your partnership agreements, do you require
them to exclusively use your service?
Mr. Bardin: Usually it's a two-year period where we
have an exclusivity agreement in place. At
the same time, once they start working with us it is extremely difficult for them to work
with our competitors because we bring so much value to the table. We provide them with all of the stuff none of our
competitors wants to mention. Things like
back office services, customer care, provisioning, billing, reporting and data mining
capabilities. These are all of the things no
one really likes to talk about, but they are the essence of providing a service.
CEOCFOinterviews: Do you have the staff to be able to provide all
of the services to your partners and customers?
Mr. Bardin: A year ago, I would have said no. However the recent meltdown in the Dot Com sector
has brought us many quality employees with great experience.
CEOCFOinterviews: Can you
tell us about some of your newest products?
Mr. Bardin: Our newest product is our Broadband
Phone, which is essentially a virtual second phone line for users with high speed Internet
connections via cable modem, DSL, or T1. It
works like this: The end user signs up for
the service and receives a device that connects their regular telephone to their broadband
connection. They also get a phone number,
which they can move with them anywhere in the world.
When they pick up the phone, they hear dial tone and they place and
receive calls just as they would with their regular phone service. With the Broadband Phone, however, the end
user also has many features that are not available on traditional networks. These are things like unified messaging and
integration with their computer. For example,
caller ID can pop up in the contact manager on their PC if they wish. We believe Broadband Phone is going to be a big
driver of revenue for us going into 2002 and
beyond.
CEOCFOinterviews: How
do the phone companies feel about this? They
make their money on how many phone lines you have in your house.
Mr. Bardin: That is exactly the point. When we are offering something that costs about
20% of what a traditional phone line would cost, that is 80% savings to the consumer while
delivering more features than are available through the traditional networks. It’s a disruptive technology that is going to
change the industry forever. Some telephone
companies will embrace and profit from it, while others will ignore it at their own peril.
CEOCFOinterviews: Is
there any competition for you?
Mr. Bardin: There is always competition, on some
level. However, in the space that we are in,
we feel we have a unique offering. While
there are several companies that are offering similar things, we are in a stronger
position and have back office services none can match.
Nevertheless, I think the most formidable competition we will see is from
some of the traditional telephone companies. The
big question is whether they will be able to move faster than us. So far, that isn't the case and we do not think
that will be the case in the future. In fact,
we believe they will ultimately become our customers and not our competitors. Evidence of this is that we have some of the
biggest phone companies in the world actually testing our service today. Also, the other companies that have been trying to
do this by themselves have been failing so far. When
they come to us, they are very excited about what we have and the fact that they can get
it all without having to go through the time and expense of reinventing the proverbial
wheel
CEOCFOinterviews: Acquisitions,
joint ventures, internal growth or additional partnerships; what will fuel your growth?
Mr. Bardin: We built a business plan around getting
us to profitability, and that is the focus of the company.
At the same time, there is certainly a lot of consolidation going on in the
industry, so it's not out of the question that something will happen in the future.
CEOCFOinterviews: Do
you have the cash and capital going forward?
Mr. Bardin: One of the great things about
deltathree is that we are fully funded. We
went public over a year ago, and have enough cash to implement our plans. We also have the
products and the partners that will enable us to continue to be a leader in our space.
CEOCFOinterviews: I
was following your chart from May of last year to March of this year. There was a lot of activity going on in May,
April, June, and July and then all of a sudden it got a little quiet there. What happened to the company during that time?
Mr. Bardin: I think we are following the same
pattern that other companies in our space are experiencing, in the sense of total meltdown
in NASDAQ. Investors today are trying to figure out how to evaluate a company. That is a very good question. How do you value companies today? deltathree is actually trading a negative value to
our cash. So everyone is naturally trying to
figure out what is going on. We think this
will change in the next two to three quarters as the markets come back, we continue to
show our path in profitability and gain investor confidence. Many investors have been burned on NASDAQ, and are
having a hard time going forward. At the same
time, the forces that are threatening to destroy the telecom industry are the same forces
that are propelling us forward. So, at a
certain point, people will have to say, "hey, these companies are not being affected
by industry trends, they ARE the industry trend."
CEOCFOinterviews: How
would you explain to a new investor exactly what is going on here?
Mr. Bardin: I think it is rather simple. First, new investors coming in today are coming in
below cash, so whatever happens, they got in at a good value for the company. Second, the space that we are in is worth looking
into. If you read up with any analyst in the
industry, they will say this is the future of telecom.
There is no way around that. Our
packet-based technology is more efficient than circuit switching, and the growth is within
our space. Overall, the two things make a
very compelling story. You can come in very
low today, and at the same time you can expect the industry to grow at a phenomenal rate.
CEOCFOinterviews: Looking
back at last year’s dot com craze, is here anything that you should have done
differently?
Mr. Bardin: I think that last year, the year of the
dot com craze, was a definite distraction to us. At
the same time, it allowed us to raise $100 million dollars that we are using to fund the
company. Therefore, I don't think there is
anything that we should have done differently.
CEOCFOinterviews: Since you started this company in 1996, what was
the biggest hurdle you had to overcome?
Mr. Bardin: I think that the biggest hurdle was
that of perception of quality with regard to Voice over IP.
That was always one of the biggest concerns out there. People used to refer to VoIP as an inferior
service. In the last twelve months we proved
voice over IP has an equal or greater quality than the traditional telephone.
CEOCFOinterviews: Please
tell us about the Internet Telephony of the Year awards that you have been receiving.
Mr. Bardin: deltathree has been recognized as the
best quality Voice over IP technology by SmartMoney and PC World magazines. We also received the Best Built Public Network
Award for excellence in IP services/applications at SUPERCOMM 2000. We are very proud of
that.
CEOCFOinterviews: You
sound very motivated….
Mr. Bardin: I
am, it's a very interesting space to be in, and a great time to be in it. There is a tremendous amount of satisfaction
gained from consistently breaking new ground in such a rapidly evolving industry.
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