In an effort to keep up with a telecommunications market that is now moving at Internet speeds, local Baby Bell firms are cutting deals with much smaller Web competitors for access to unified messaging services such as Internet-based faxes and voice mail.
It's an unusual move for the large, entrenched Baby Bells, which just now are seriously ramping up high-speed Internet services. But the local firms don't have the option of coming late to the game, as their own revenue base for messaging services could be at stake.
"The telcos [telephone companies] see what's happening on their networks. They know that convergence of voice and data is happening," International Data Corp. analyst Mark Leavitt said. "They need to be perceived as ready for that convergence."
Unified messaging--a term that includes Internet faxes, email, voice mail and other services--is still a very young market, with relatively few subscribers. But analysts say it has engendered enough excitement that businesses big and small are beginning to look for services that provide voice and email messages in one accessible place.
To meet this demand, phone companies have to improve their own services, or start to see customers grab free services offered by firms such as JFax or OneBox.
While most have long-range plans for their own in-house unified messaging operations--some, like US West, have small-scale consumer offerings already in place--telephone companies are looking to jump ahead of the curve. This means partnering with smaller companies that are already up and running.
"Basically we want to make sure we're partners with the people in the industry who can take care of business customers right away," US West spokeswoman Marisol Konczal said.
That's good news for the handful of firms that are gearing themselves to cater to the phone companies, rather than developing their own set of competing services.
Critical Path is the latest beneficiary of the telephone giants' interest in universal messaging. The company announced a deal today to provide small business customers in US West's coverage area with Internet fax services. This deal follows closely on the heels of a similar agreement with BellSouth last week.
The pressure the Bells feel comes from companies like JFax--which has its own deal for voice-enabled email with Ameritech. Some firms are looking to offer traditional phone service over the Internet along with their universal messaging packages. Such offerings could draw cost-conscious customers away from the Bells to some of the Web start-ups, analysts say.
Universal messaging companies have created a stir in the market in recent months, attracting significant venture funding and media attention. For example, OneBox recently announced a funding round that brought it to $20 million in investment capital.
Nevertheless, analysts say companies like Critical Path or Cisco Systems, which are geared more explicitly toward working with the large communications providers, are more likely to find a stable future in the growing market.
"There's a big target on the back of these telcos by all of these companies looking to offer unified messaging services," Jupiter Research analyst Dylan Brooks said. "Some are working with the telcos, and some are working against them. I think the successful ones are going to be the ones working with the telcos."
The transition from the old-fashioned, paper-based fax to the world of integrated Internet faxes, email and voice mail is happening slowly, however. Analysts say it's hardly a deal breaker for businesses looking to sign up with a carrier for telecommunications services.
"The pressure from these Web services is beginning to be felt, but not really on the bottom line," Leavitt said. "I can't imagine that anyone would not sign up with a service provider today because they don't have unified messaging."
But the local carriers do need to have a plan to show customers, Leavitt said. To meet this demand, those carriers are looking to outsource messaging services through companies such as Critical Path or Cisco.
In a deal with Critical Path, for example, US West is offering a consumer service that allows customers to send and receive faxes and voice-enabled emails from a single online mailbox, all over their existing phone number.
The small Web firms also get a boost from such deals, as telephone firms bring to the table thousands of potential messaging customers from their long-established customer bases.
Most of the free services, like OneBox or uReach, require their customers to set up a new telephone number to receive messages. The telephone companies already have these numbers up and running, and can plug the new services in as an added feature. This substantially lowers the barrier to winning the new customer, and also allows the telephone company to charge customers for the service.
"Web companies are recognizing that these are likely to be supplementary services, not a substitute [for existing phone companies' services]," Brooks said. "That means interoperability is key."