VoIP: A smart idea takes hold

My Net Fone’s move into the fledgling internet-telephony market was a brave move in 2004, but the pace and acceptance of online phone calls has vindicated the company’s faith.  

Voice-over-internet communications technology was a brand new concept back in 2004, when Andy Fung (pictured right) and Rene Sugo started listed voice-over-IP business My Net Fone.Their biggest challenge? Convincing customers to buy a product that they didn’t even know they needed.”At the end of the day you need peer recognition,” Fung says. “Of course, this is terribly important as our biggest problem starting up was market scepticism.

“While we in the industry might know that VoIP (voice-over-internet-protocol) was the right way to go, in consumer land it was still an unknown quantity. More importantly, it could have been something that just came today and was gone tomorrow.”

Fung says in order to build credibility, the company put itself on the line and offered its products for review to a number of magazines.

“Most consumers are not involved in the industry and rely on experts to guide them,” he says. “So when I want to buy a car, I go out and read what the people’s experiences are and see what I should buy. Peer recognition is very important.”

Strong results

The strategy appears to be working. The company, which is listed on the Australian Stock Exchange, reported in its first-half results on 19 February. Customer numbers increased from 46,000 in December 2007 to 65,000 by December 2008.

Revenue during the six months to 31 December increased 52.9% to $4.5 million, and the company finally broke even, posting a net profit of $8640 (gross profit was $1.8 million).

Fung says customers are looking for better value during the downturn, so the company is well set on its goal to growing profit.

“Obviously an economic downturn is not good for everyone and is not something that you want to happen, but actually we are doing quite well out of it, and that’s simply because this is really just tightening the belt of residential consumers.

“They are watching every penny they spend. During good times, with a saving of 20% to 30%, people may not worry about it, but now they are. For them to save between 30% and 60% is quite a big saving, and means a lot in today’s economic climate.”

A fast growing sector

Fung and Rene Sugo (pictured at right) started the business after working in another start-up, selling VoIP equipment to internet service providers and systems administrators. But Fung says the decision to switch to selling retail VoIP services to households was an easy one.

“Basically we were selling and supplying telecommunications equipment. We were talking to a lot of people and came to the conclusion that there weren’t too many people who knew anything about voice-over-IP services,” he says.

“Seeing as we claimed ourselves to be the experts in such things, we thought we might as well start doing it ourselves.”

But selling the product wasn’t easy. Fung says it was simple to sell telecommunications equipment, but marketing to a residential base was an entirely different scenario and needed a new approach.

“The challenge for us was seeing how we could adopt this technology and basically ‘productise’ it, and not be too technical, to the end user who didn’t know much about it. We had to simplify it and make it easy to use.

“It was a matter of saying – how can we productise it and sell it to the consumer without having to explain too much of the technical knowledge?”

Fung says the amateur status of the industry didn’t help things. “Obviously some people were very sceptical because VoIP had been going on for quite some time but was very amateurish. And the quality wasn’t there, just like the early days of the PC.”

But Fung says removing the technical jargon from the product gave them ammunition to solve both problems.

“From a user perspective we wanted to hide all the complexity and make it as simple as possible. If you know how to receive and make phone calls as normal, then you can use VoIP,” he says.

“Today those are the mottos that we keep benchmarking against. Is it easy for the consumer to use?”

My Net Phone clearly finds itself at the centre of one of the fastest growing areas of the telecommunications sector.

According to the Federal Government’s Australian Communications and Media Authority, reliable figures about the exact size of the voice-over-internet market are difficult to obtain because many providers do not reveal subscriber numbers. But research group Market Clarity forecasts a 237% increase in internet-based VoIP subscribers between June 2007 (1.4 million) and June 2011 (4.8 million).

While the business is expanding rapidly, Fung says his only regret was holding back.

“If anything we would go back, raise more capital and expand even faster than we what we might have done. But we were a bit conservative in terms of our health given a new market and new business,” he says.

“Now we’ve been through it, we realise we could even run faster. We could have expanded more than what we have done so.”