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VoIP Is Verisign's Latest Domain

The name Verisign (VRSN) is usually associated with Internet domain-name registrations and e-commerce. Less well known is the tech-services company's telecom-services unit, which supplied roughly one-third of Verisign's third-quarter revenues of $325 million. Cell-phone companies and other telecom providers pay Verisign to act as a neutral switchboard for calls going across different networks and to calculate the wholesale billing for the calls.

And that's the essence of Verisign's latest venture, an effort to create a neutral switchboard for voice-over-Internet-protocol (VoIP) telecom services. The idea is that Verisign will let disparate VoIP networks communicate easily and cheaply. The company launched the service in October, 2004.

BusinessWeek Online Technology Editor Alex Salkever recently interviewed Tom Kershaw, vice-president for communications services at Verisign. Here are edited excerpts of their conversation:

Q: I thought you guys were in the business of security, e-commerce, and dot-com registrations. What are you doing with voice over the Internet?

A: We think of ourselves as being in the connectivity business. In our Internet business, with our DNS [domain-name server] services, we allow people to find each other by making sure the Internet directs requests to the right Web site or the right e-mail address.

In the communications business, we allow different voice networks to connect with each other. Local wireline providers, cellular providers, and long-distance providers have their own technologies to run their networks. When it comes to going outside of their network, they need services to connect with other networks and do billing between those networks. It's a way of connecting islands.

Q: So what does this have to do with VoIP?

A: What we've announced is the initial pieces that allow different islands in the VoIP universe to connect with each other. You need a directory infrastructure, like DNS, to find a phone number that's connected to an IP (Internet protocol) address. You need a security system that allows these calls to pass between [different] entities [that don't know if they can trust one another]. And you need to be able to interconnect different technologies.

This is a critical function that would let, say, AT&T's (T) VoIP network talk to Verizon's (VZ) VoIP network more easily and cost-effectively. Or do the same thing for regular companies that are [on] VoIP networks.

Q: Does this mean companies could cut the telecom-service providers out of the loop?

A: There will always be providers of communications services. You need networks. and you need applications on those networks, like voice mail or IM [instant messaging]. But companies aren't going to want to deploy everything themselves. It's a lot of work, especially for smaller companies. So service providers will definitely play a key role.

But the role of the telephone company is a different question. I'm not sure we'll even say that word anymore. We'll think of communications providers as people who provide us with broadband access and people who provide us with applications. You won't just buy dial-tone like you do today. You'll do IM with voice integrated [into the technology]. You'll have games with voice integrated.

Q: But it seems like one of the more obvious benefits of a VoIP interconnection service like yours would be to let companies avoid the high cost of using local phone networks to make and receive calls.

A: We are definitely talking to [companies] about that. But first we have to get enough customers onto the network. That's where the industry is focused right now. If you've only got a few hundred VoIP subscribers, it's not worth the trouble to connect them all. Once you've got to 2 million or 3 million customers, it starts to get more interesting.

There are 8 million VoIP PBX stations in North America. That will increase by 3 million to 4 million this year and 3 million to 4 million next year. You're starting to get to the point in the enterprise where joining these corporate phone systems together directly makes good economic sense. It's a good example of Metcalf's Law, where the community value of the network grows exponentially with each new user, like fax machines and e-mail.

Q: How many customers do you have?

A: Right now, one. But we just introduced this service several weeks ago. As the word gets out, we'll get more and more people using it. The thing the service solves are the two biggest barriers to mass adoption of VoIP, interoperability and security. Someone had to address interoperability so that everyone could talk to each other. And on security, a big VoIP system open to the public means opening up a multi-thousand port range on the firewall. That's a huge, scary hole.

What our service does is sit on top of the firewall and make sure all those ports are closed. When a call is done, we'll close that port back up and make sure the network is still [secure].

Q: What makes you think this will be a growth business?

A: The address space for telephony is huge. It's in the hundreds of millions of phone numbers. In North America, there are 180 million phone numbers alone. That compares to only tens of millions of IP addresses in the DNS world. What's even more interesting is that in VoIP you can allow customization of those addresses. There's a huge appetite for customization in the under-25 market.

An example is the ring-tone market. That's a $4 billion market. Addressing is similar. Instead of getting an actual phone number, say I want my phone number to be TomK. In VoIP you can do that. It can be TomK on a computer keyboard or on a phone touchpad. As long as it's unique, it works.

And you could have different phone numbers that end up at the same phone with special warnings. You could give your mother-in-law a special phone number, for example.

Q: So you can do lots of neat things with VoIP. But most people can't even use all the features on their regular phones.

A: That's true, and if we don't find ways to make this compelling to users in the form of new services, we're wasting our time. We might as well not do it. That's one of the key challenges to present this to consumers in ways that they can easily do and understand.

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