Polycom, Quicknet Add to Internet Telephony Arsenal

The companies are betting on different markets. One believes in PC add-ons, the other in stand-alone appliances.

by Joel Enos of siliconvalley.internet.com [September 15, 2000]

Internet Telephony is coming on strong, particularly for two companies who made key acquisitions this week.

Polycom not only reported that it now had a 50% share of the entire video conferencing market, but also announced plans to acquire Canadian IP products manufacturer, Circa.

The full transaction (totaling about $90 million) will be completed around the first quarter of next year, coinciding with the release of the first joint product, an analog desktop phone, with an Internet screen and the capability to do voice and data via IP.

The acquisition will also help the company to move into the rapidly expanding small and medium sized business market, as well as to keep up with their already strong efforts in building the high-speed communications market. That market, often abbreviated as VoIP (voice over internet protocol) is rapidly gearing up to compete on a wider scale with regular telephone and long distance service companies by offering alternative services and cheaper rates.

Is there a race to get the first IP phones on the market? And is there a demand? Ken Smiley, an analyst with Giga Information Group says maybe. "A couple of other companies have looked at the space and said 'no, it's not ready yet,'" he explains. But while overall performance has been poor so far, he says he knows they are "making improvements so that doesn't mean it won't get better in the future."

And, as with any Net or technology company, the future is always now. While Smiley says that IP phones are "too early at this stage for wide acceptance," companies like Polycom and San Francisco's Quicknet are planning ahead to the next year or so when "people will have a hard time separating IP from regular phone service," explains Stacey Reineccius, CEO at Quicknet.

Quicknet scoops opensource
Quicknet makes a series of PC add-in cards that allow users to get high-quality, low-cost connections across IP networks. The company announced that they have acquired Equivalence Pty, the Atlanta company that created OpenH323, an Open Source implementation of the ITU H.323 protocol that provides interoperability between users, gateways and gatekeepers.

Though both are growing at a phenomenal pace (Polycom has also purchased two other companies, ViaVideo Communications and Atlas Communication Engines recently), for now, the two companies are not in direct competition. For one thing, Quicknet's Reineccius says her firm has no plans to enter the desktop phone market anytime soon. "Most people, 76%, who do VoIP use a PC to make calls. Only 3% make it with appliances," says Reineccius. "It's not about a shortage of appliances, but a matter of cost and ease of use."

Still, that statistic could change if the Polycom phone ends up being as simple (or, as the case may be, more simple) than your average WAP phone. And a lot of people have already been turned on to VoIP despite the tricky reputation of IP gadgets and services. DialPad, a VoIP service that launched in October 99, reports 9.5 million registered users for its free Internet calling service. That's good news to Quicknet (their products are for sale at the DialPad Web site), as well as to the IP industry as a whole.

"Our market space is going through another growth change," says Reineccius. "It's like a single-celled amoeba that's already divided into the techie consumer and the carrier markets, and now, it's moving again into small office; really into more what I'd call the mainstream."

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