SAN DIEGO (MarketWatch) -- The best thing about Dan Borislow when he ran Tel-Save (now Talk America) in the 1990s, at the time an upstart provider of cheap long-distance service, was he'd answer any and all questions, even if they it was confrontational -- as mine usually were.
And often those answers weren't short or t sugar-coated. He was great copy. Then he quit the company, sold his stock, pocketed a lot of money and galloped into the sunset to become a racehorse owner.
But, horse racing has its limits for an entrepreneur, which can only mean one thing: He's back!
I had heard through the grapevine that Borislow started a new company in the voice-over-Internet (VoIP) business, so I asked him: Is it true you started a new business?
Simple question, right? This is his e-mailed answer -- and trust me, even with the technical nitty-gritty it's a great read, especially in light of eBay's (EBAY: news, chart, profile) Skype acquisition:
"I have been working on a new company for awhile, but have only hired people over the last four months to work with me. I have another idea that will shake things up again if I can get the right vendors to work with me.
"VoIP really has not been ready for primetime, where you can operate a company and make money at this -- until now. With that said, you would have to operate your company to perfection to be successful. There are a number of things that are getting better very quickly, but there are some things that need addressing for the good of our whole telecom system in the U.S. The price of everything involved with VoIP and Wi-Fi is dropping dramatically, with the performance of these products increasing inversely to their price. That is what holds all the promise.
"Here is the problem: We have way too little bandwidth on our cellular and international networks. As a result, they use codecs, which are voice compression techniques using complicated algorithms. That in itself is not the issue, because you still can maintain super voice quality using these codecs. The issue is when the different cellular carriers and VoIP guys use different codecs. Every time you use a different codec, you add delay, because it takes the switch and its DSP time to convert analog to digital. If the carriers are using different codecs, it must be converted once again. Cingular and Verizon, for instance, use different codecs, which is why you will notice a difference of voice quality when you call from a Cingular phone to Cingular phone as opposed to Cingular to Verizon.
"It is getting worse because the more cellular subs there are, the algorithms get more complex and the delay gets worse. VoIP uses different codecs than cell right now. But the huge thing that is happening is that cell companies are about to be the largest buyers of VoIP switches and gateways -- and then the equipment manufacturers will be forced to supply these codes with these switches.
"My problem in launching right now is that I need to make sure I set up a network that will be ready for the future. The best VoIP switches now recognize the codec others are using and will use that codec (which will happen in one year) instead of a predetermined one. Incredibly, the switches are just now being updated with enough DSP power to do so. This will happen over the next six to 12 months. There are plenty of companies in VoIP where their switches are obsolete already and must be replaced. In fact, that would be the majority. (I hate to say it, but Lucent (LU: news, chart, profile) and Nortel (NT: news, chart, profile) in North America will be the most successful, by far, in updating and coming out with the right technology, while many others will go bankrupt. The Chinese will be the lowest price with great technology, but with virtually no customer support in the U.S.)
"At my old company, we had the best voice quality of any network in the country, with the best billing and sign-up capability. I have always believed that besides having a marketing gimmick, you need a product differentiator to be successful over the long term. Tel-Save signed up over 4 million customers on America Online (TWX: news, chart, profile) , and still profits to this day from that deal. That deal was worth in profits close to $1 billion.
"Call me crazy, outspoken -- whatever -- but if you were to collect my public statements and my intense desire to get out of that business when I did, it would seem to make sense today. I was competing against a ghost with Worldcom and CLECs (competitive local-exchange carriers) that were willing to lose tons of money; the dumbest and/or the most crooked telecom and Internet analysts; the worst partner you could have in AOL and, very honestly, a difficult media that was misled by the aforementioned people.
"The proof is that all these people were either arrested, fired, fined or something not pleasant except for the media and Tel-Save. Even after losing the top visionary in telecom, Tel-Save still survives as Talk America (TALK: news, chart, profile) . The reason is that it had the systems and personnel in place , I had bought back over $400 million in debt before I left and there was a very profitable business that was built on my ideas.
"The bottom line is that I was right then and exited at the perfect time. I will do it again (except for the exiting part!) if I can put together a couple of more pieces that are technically feasible to do in the short-term. I believe that I can build something much greater and longer-lasting and that I will do so not only though better ideas, but also because I went from being blue collar to white collar almost overnight and was ill-prepared to deal with these people from AOL, investment houses and the believing media -- and at the same time compete with companies that would lose all of their money to the point of bankruptcy.
"I was right to exit when I did. I was wrong in setting myself up and making public to my shareholders before I exited promises given to myself by an unnamed company, who indicated they were going to buy Tel-Save. I should have known better not to trust what I was hearing. I feel like Steve Jobs in the sense that I have matured and I've learned to make sure I control my own destiny, not to listen to so called experts (analysts), because I know what is best for my company. I will now handle PR better and instead of writing off criticism from the media (and let it get under my skin), I will understand their point of view and rationally explain mine to them.
"Vonage and others need to hire telecom guys to figure out the technology for the future and use much more creative marketing schemes to lower their acquisition costs. My ideas, if executed with precision, will dominate the industry."
So what exactly will this new business be?
"Without giving you my groundbreaking ideas," Borislow says, "the company will most likely be called Talk4free. Just like Tel-Save took existing rates in the industry down about 50% overnight, this will be even better for the consumer. It will be wireless, but I do not like calling it VoIP-like. The quality of conversation will be excellent and the features will be unmatched."
So it'll be a free VoIP? He'll only hint that it could be free phone service in Wi-Fi enabled areas.
How will he make money on something that's free? "If I told you how I make money," he said, sounding like classic Borislow, "then I would have my competitors an opportunity to beat me to the finish line, and I don't like second place."
Should be, in short, quite a race
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