Mass High Tech: The Journal of New England Technology
September 8, 2006
by Efrain Viscarolasaga
Mass High Tech

Will debut first consumer app at Fall VON show in Boston

Dedham's RNK Telecom Inc., a competitive local exchange carrier and provider of wholesale phone services to consumer voice over Internet protocol (VoIP) service providers like Vonage Holdings Corp., is throwing its own hat into the retail ring.

This week, the company is launching its ReVos service, a consumer VoIP product offering customers low-cost international calling to 42 countries, virtual numbers and the ability to make IP-based calls using a cell phone, among other features.

The service is a departure for the facilities-based CLEC, which was founded by Chief Executive Officer Richard Koch and Executive Vice President Joy Tessier in 1997. While the company sells prepaid calling cards to a consumer base through supermarkets and convenience stores, it has traditionally been the wholesaler and sometimes service manager behind more well-known consumer services, such as Vonage and Packet 8, both of which are customers of RNK.

"We have a lot of wholesale customers that come to us and want us to build the back end for them, as well as lease the lines," said Koch. "We were already doing it for them, so we're just cutting out the middle man."

RNK will use its established channels, including supermarkets and convenience stores, as a sales channel, eliminating the need for sales sites to stock any equipment. Hardware for the home phone service will be shipped to new customers the next day, while cell phone services will be available after the transaction.

RNK will initially focus an advertising and media push on the Massachusetts and New York areas, though due to the geographic ubiquity of broadband service, ReVos will be accessible across the nation.

While RNK will be investing an considerable, though undisclosed, amount in its marketing campaign, Koch admits much of the dirty work in that area has already been done by companies, such as Vonage, that have made VoIP a household word.

"And we thank Vonage for doing all that premarketing," he said.

Analysts, however, are hesitant to put a stamp of approval on the move. VoIP and Vonage have become well-known identities in the consumer market, yet that has not translated into widespread adoption or profits. Consumers are still skeptical about getting a VoIP service, according to a recent Frost & Sullivan report, and Vonage's subscriber base (reported at about 2 million) and financials (the company posted a net loss of almost $160 million in the first six months of 2006) back that up.

With those numbers, RNK may be better off staying in the wholesale business, said Paris Burstyn, a research director at Yankee Group in Boston.

"RNK's wholesale play looks like it has much greater potential than the consumer line of business," he said. "Selling directly to end users carries greater risk, higher sales costs and lower margins."

Unlike services such as Vonage, however, Koch is not looking to bring VoIP to every man, woman and child in the country. He knows what his company does best, he said, and in this case it is providing low-cost (1.9 cents-per-minute) international VoIP calling, a market Koch called "ripe for the taking."

"We're going to hit the segments we know. We've been selling international calling cards for seven years, so we have some idea of what we're doing," he said. "We don't need 50 million subscribers for this to be successful for us. If we have one million customers initially, we'll be happy."

RNK is also not abandoning its wholesale business, said Koch. In fact, it is the wholesale business that is helping the company explore options for its retail offering.

"Everything we've learned from our resellers, we've put into these products," he said.