Orbit set to expand national VoIP network

Internet telephony service provider Orbit Canada Inc. of Toronto is planning to ramp up its voice-over-IP (VoIP) network by setting up points-of-presence (POPs) in five more Canadian cities by the end of this month.

The company currently offers its $19.95 monthly bundle of unlimited long distance and Internet services to residential customers in Toronto, Montreal, Vancouver, Calgary, Edmonton, Ottawa, Winnipeg, Hamilton, Ont. and Kingston, Ont.

The company has not named the five new cities in which it will be offering services, but it said it would be in a position to supply 85 to 90 per cent of the Canadian population by the end of this quarter. These forecasts were originally supposed to have been met by the end of 2000.

Orbit CEO Gord McMehen told Network World Canada that his company is also in talks with a major Canadian carrier to begin working on a joint venture that will bring Orbit’s services to the business market. Orbit is also examining setting up POPs in Southeast Asia and Eastern Europe, “where the costs of terminating a call are much more expensive than in Canada,” McMehen said.

McMehen said Orbit has long-range plans to become an international clearing house that can move traffic for other carriers.

Currently, however, Orbit’s business model for its 5,500 Canadian customers consists of offering basic dial-up Internet access and long distance service across Canada and to the United States at a fixed cost.

“So far the reaction to our offering has been in the voice rather than the data transmission (area),” McMehen said. Orbit began offering its service in October of last year.

The company offers unlimited long distance services – notoriously a tough place to operate due to poor price margins – by sending the long-haul part of the caller’s transmission over the Internet. It gets around the problems traditionally associated with VoIP, such as legacy phone equipment in the home, by switching the call through the traditional PSTN in the originating and destination cities.

For instance, if a customer wants to place a call from Toronto to Vancouver, it must first dial a local number. The call is then sent to Orbit’s network via local T1 loops leased from Bell Canada. Orbit’s software then recognizes the caller as a subscriber, and the caller dials the long distance number after a dial tone is given.

A Clarent media gateway then switches the call from the PSTN to the Internet, where it is sent to Vancouver. Once it reaches that city, Orbit’s network terminates the call by dialing a local number and switching the transmission from IP back to the PSTN.

In the United States and in Canadian cities where it does not have a network operations centre, Orbit terminates calls through arrangements with regional telephony carriers.

According to McMehen, the quality of the transmission is just as good as a traditionally switched call. He admitted that the company had some complaints from customers whose calls were being handed off to other carriers, but the situation has been resolved.

Though Orbit believes it is the first company in Canada to build a national network to offer this type of VoIP, sending long distance over the Internet is not new, said Joe Gagan, a senior analyst with the Yankee Group in Boston.

“Twenty-five per cent of calls go over IP now and people don’t even know it,” Gagan said.

In the United States, companies like the AT&T-backed Net2Phone are already five years ahead of Orbit, added Gagan’s associate Ian Grant, an analyst with The Yankee group in Canada in Brockville, Ont.

Grant is skeptical of Orbit’s business model due to the two markets it competes in.

“Canadians can now essentially call for free,” Grant explained. “If you call (long distance) more than $20 a month, you’re essentially getting free service.”

He added that there is not much of a future in offering dial-up Internet access.

“We see a lot of ISPs that grew up with dial-up (now) facing a brick wall,” he said.

“This Orbit idea has some wrinkles but I don’t think it’s the killer app,” Grant continued. “We won’t have VoIP until we have better penetrations of high-speed Internet access. It’s about four per cent now. It’ll be about 20 per cent in five years. (So) we will have VoIP in about a decade.”

Orbit is on the Web at www.orbitca.com.