The wholesale voice business doesn’t get much attention these days, but plenty of revenue still flows through it and many of the companies within it are lean and hungry. One such company is Peerless Network, which has recently been moving into the enterprise voice market. With us today to talk about Peerless Network’s approach to the voice business is co-founder and CEO John Barnicle. John has been in the telecom business for three decades now, starting with the local telephone monopolies and co-founding both Focal Communications and Neutral Tandem before this.
TR: How did Peerless Network get started?
JB: I'd worked with Rick Knight and each of the other four co-founders at different points in my career, and at one point we all found ourselves available. We did a backwards analysis that asked, "What kind of problems are there in the industry? What have we had to deal with in our past? Is there a way of looking at them as an opportunity instead of as a problem?" Through our collective experience trying to interconnect with the local phone companies we realized that process had not really improved all that much over the years and in some ways there was some backslide. So we decided to go out and solve that problem on other people's behalf by setting up an interconnection network that at least minimizes, if not eliminates, the need to interconnect with the local phone companies. And we are 10-12 years later.
TR: That was at the beginning of the VoIP revolution. Were you using the new technologies in your efforts, or optimizing the old ones, and how has your platform evolved since then?
JB: A little bit of both. We were using the first generation border controller of Sonus, now Ribbon Communications. We still use a lot of Ribbon gear, and we now also use Cataleya for different niche applications. But the network itself has grown exponentially. We now probably have close to 1.5 million SIP trunks in service to various service providers and enterprise customers.
TR: Beyond SIP trunks, what other services do you offer and which are performing the best for you?
JB: We can provide any kind of voice phone service: long distance, international, toll free, inbound, outbound, and origination/termination. We have also broadened that a little bit to include some data services, colocation, and messaging. Over the course of time we've seen some price compression especially in the wholesale long distance market. The good news is that if you think of us as an exchange, while revenue per minute has gone down, our cost per minute has generally trended the same way. But I think a lot of our other products and services have more potential in the long term. For instance over the last year we have started to address the enterprise customers more directly through sales agents.
TR: What types of customers do you target?
JB: We started with carriers and it quickly became apparent that the marketplace was shifting to VoIP. Now we do business with virtually every sizable VoIP entity out there. We take all comers. With the portfolio of voice services we have, I think we won't run out of target customers until people stop talking on the phone.
TR: What prompted your interest addressing the enterprise market? Are enterprises now consuming the products you were offering, or are you developing new products to meet their needs?
JB: It's a little bit of both. We've been around now for over 10 years and we’ve signed up most of the service providers, so we are at the point of diminishing returns there because there are only so many RingCentrals and 8x8s and Googles out there. And while we provide services to a host of smaller entities, collectively they're still relatively small. Our take on things is that there are a lot of enterprise customers that are big, if not bigger than a lot of those service providers. We had to adapt our products to fit a little easier, and we developed a web portal to ease ordering and management. But, by and large, they're the same products and services overall.
TR: Do you have any new offerings in the works for the enterprise market?
JB: We just launched enterprise services in March and have continued to evolve the product since. It started as largely SIP trunking and various forms of traffic that you use over that. We've since rolled out a UCaaS service and recently added a P2P and A2P messaging platform. We will continue to roll things out that are pertinent to that customer space in particular and make sure they're orderable through our portal. Some will buy our a la carte and others will enjoy the entirety of the portfolio.
TR: Do you anticipate any new opportunities from 5G when it arrives?
JB: All the mobile carriers are customers of ours and we’re interconnected broadly and deeply into their networks. So we'll benefit to the extent that 5G increases voice traffic generally. We're seeing some uptake in from MVNO providers. Historically, we've struggled with providing services to them because essentially they were just reselling the services of the big four or five wireless carriers. But there are more options these days to provide a voice-over LTE or voice over 5G type of an arrangement, since the more bandwidth there is the better the voice quality, and the more likely they are to take control over provisioning apps with phone numbers that they can procure from companies like ours. Over time those MVNOs will beat a path to our door or we'll beat a path to theirs, as the case may be.
TR: How do you view consolidation in today’s market? Are there opportunities to grow the business inorganically?
JB: We think so, actually. These terms get thrown around fairly loosely, but you could characterize Peerless as a platform company. We have a nationwide network that we own and operate and maintain and control. We also have a lot of homegrown apps, and an ability to provide a wide range of services. So we may look to boost our growth through acquisitions of our own. Until recently I would say it's been more of a seller’s market, but I've seen a little bit of a softening just in the last month or two. I think there are opportunities out there for us today, and I think those will grow in the near future.
TR: The voice business has a reputation of being commoditized, how does Peerless differentiate itself?
JB: It depends on the product or service. Some of the things that we provide, there's really maybe only one or two real competitors for us and the hot spots are price, geographic reach, customer service, ability to package, ability to build personal relationships and the like. For others, we're competing against broader slough of people. I really think the network that we've built and the things we've layered onto it give us a measure of control that allows us to provide a higher level of service for something like UCaaS, for example. Even though we're new to the market, we built a really solid platform on a great foundation and I don't think our service levels can be touched, even by some of the big names.
TR: What geographies do you see as attractive for expansion?
JB: We cover probably about 90% of the US population with our core services. We continue to add a market here or there every few weeks or so, but it's reaching the point of diminishing returns. However, we did recently announce an expansion into the UK. We are now a certified carrier in the UK, with our own native phone numbers and interconnection with the BT’s of the world. We see that as having some real upside in the coming months, and we're working on doing the same in Canada as well.
TR: What types of differences do you see in the UK and Canada compared to the US market?
JB: We're focused on English-speaking countries for the most part so we don't have language barriers to boot and the currencies are relatively stable. The regulations do vary from country to country. But I think what we are finding is that the ecosystem is just far different. There is less competition overall, and definitely a different suite of competitors. So it has required a little bit of adaptation on our part, but nothing extraordinary.
TR: What kind of revenue growth do you hope to achieve?
JB: It has been tough for a lot of companies to grow the top line with price compression and regulatory fiats and the like. But I think we're probably expecting high-single to low-double-digit percentage growth over the next several years.
TR: Do you see any regulatory issues on the horizon to keep an eye on?
JB: Well, without being too disparaging to our government, I would always hope that they would do less than more. Because when they do things, it takes a while for everyone to kind of reorganize around what they've done. The FCC still has a full plate, so it's not exactly clear when they're going to rule on a number of open items. But I don't see anything major impacting our business. Some things we might have to work around, and some things might provide some opportunities for us. It really depends on timing and the details associated with any specific order that they might issue.
TR: Thank you for talking with Telecom Ramblings!
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