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Connecting With ISPhone

Into the Wayback Machine

  • May 12, 2008
  • By Gerry Blackwell

Times change, businesses have to adapt. Any entrepreneur knows this. But nowhere is it truer, perhaps, than in the telecom and Internet industries.

Just ask ISPhone Inc., the Traverse City, Mich.-based IP telephony wholesaler we first wrote about in 1999 when founder and president Victor von Schlegell was just getting his company off the ground.

ISPhone survived, thrived, and still caters to small and medium-size ISPs--"we're a phone service enabler for service providers," is how von Schlegell describes the company--in large part because it was willing and able to adapt to the topsy-turvy of the telecom industry.

When a press release came over the ISP Planet transom recently announcing a new ISPhone product that allows service providers to integrate their Asterisk switching systems with RADIUS-based authentication and billing, we were intrigued. This didn't sound like the ISPhone we remembered. Maybe it was time to revisit.

Back in 1999, von Schlegell saw ISPs--even small ones--waking up to the fact that they could diversify and increase ARPU (average revenue per user) by adding IP-based phone services to their mix, and he saw a business opportunity for himself.

ISPhone would buy long distance services in bulk from new competitive carriers and wholesale it to fledgling ISP phone service providers. The ISPs could still turn around and retail long distance to their customers at prices far below what telcos were charging.

"Part of the original model," von Schlegell explains, "was that we'd create a network of service providers that would in effect be a community--and they'd terminate calls to and from one another."

ISPhone would provide the interconnection among customers and to and from the public switched telephone network (PSTN) through its IP phone gateways.

But not long after we talked to von Schlegell in 1999, the North American long distance arbitrage market started to go south. As competition among carriers heated up, rates plummeted, and margins for arbitrageurs like ISPhone were pared to razor thin.

"Just terminating calls inexpensively, which we still do, was no longer enough," von Schlegell says.

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