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Scrambling For a Slice Of Internet Phone Pie

Sentito Networks Inc. is working to expand its small roster of clients. The Rockville company's technology helps voice traffic merge onto data networks. It now has seven providers of Internet connections as customers. Jeff Heynen, manager of product marketing, said the company, which has received $53.5 million in venture capital since its founding in 2000, is counting on testimonials from its clients to win new ones.

"It's a hyper-competitive environment," Heynen said. "The service providers thinking of offering VoIP services are getting inundated by competitors like Nortel, Cisco and others."

BroadSoft sells voice over Internet protocol providers desktop software that helps users program phone systems.

Internet Calls Some of the Washington area businesses selling VoIP phone systems or software to run them.
_____All About VoIP_____
Convergence Emergence (washingtonpost.com, Dec 14, 2004)
Let's Talk About VoIP (washingtonpost.com, Dec 14, 2004)
Live Free or Buy (washingtonpost.com, Dec 14, 2004)

BroadSoft Inc. is concentrating on international markets. The Gaithersburg company sells VoIP providers desktop software that helps users program their Internet phone systems. It also makes software that routes calls to the right place.

In six years, BroadSoft has accumulated more than 90 VoIP carriers as customers. Now it's trying to sell to international carriers before competitors get to them, said Scott Wharton, BroadSoft's vice president of marketing. He said the company's goal is to take BroadSoft public in 2006.

NexTone Communications Inc., also based in Gaithersburg, makes software that helps carriers hand off calls to each other and monitor the traffic on their networks. The company, which has received $32.5 million in venture funding, is trying to win the business of large VoIP carriers but it's competing against large equipment vendors.

The Internet phone trend also has affected companies not directly involved in the field. The primary business of District-based NeuStar Inc. is maintaining the North American database of phone numbers, a service that is essential for carriers to route calls properly. NeuStar has retooled its technology to track the growing volume of calls riding over the Internet, said Jeff Ganek, chief executive of the company.

The most visible players in VoIP are the companies that provide and market the new technology directly to consumers.

The Washington area has several such companies, although they are bit players compared with the industry's biggest player so far, Vonage Holdings Corp. of Edison, N.J., which has more than 400,000 customers.

Primus Telecommunications Group Inc. of McLean has more than 30,000 customers for Lingo, its service offering local, long-distance and some international calling for $19.95 a month.

The area's biggest communications companies also are moving into Internet calling. America Online Inc. of Dulles is testing a consumer offering. MCI Inc. of Ashburn sells Internet phone service directly to businesses and offers it to consumers through cable companies. MCI declined to say how many customers it has for its Internet phone services.

Some companies are getting into Internet phone calling because they have little choice, analysts say. Companies that provided long-distance service over regular phone lines, such as MCI, AT&T Corp. and Primus, are watching long-distance rates and revenue plummet.

John Melick, co-president of Primus, said the company decided it had to offer an Internet product to attract new customers, even at the risk of taking customers from its older, shrinking long-distance business.

"We all want to pay less for phone service," Melick said. But he said customers will be willing to pay for good service and for wireless and high-speed Internet services, so Primus is investing to offer all of those.

He said the company can compete with bigger players because it already owns telecommunications networks in 150 countries and can afford to offer international calling at a lower rate than some of its rivals.

The most daring companies may be start-ups created solely to offer Internet calling to consumers, such as SunRocket Inc., a Vienna company recently launched by former MCI executives. SunRocket markets itself as a consumer-friendly alternative with "no gotchas" such as activation charges and cancellation fees charged by big phone companies. But analysts said such small players are about to face the formidable brand names and marketing budgets of companies such as Comcast.

"The name of the game is the number of customers," Arnold said. "These little guys don't have enough money. The big guys are going to be spending their brains out."

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