Silicon Valley Startup Wants to Take On the Telcos

Dec. 17, 2007 — -- The telecommunications industry has always known that there are tons of revenue in voice communication. Now, after years of sitting on the sidelines and being frustrated by the telcos' slow pace of innovation, Silicon Valley wants a taste.

Ribbit, a startup comprised of telco veterans, web experts and software developers, wants to be a global phone company. The plan? Attract tinkerers with a highly customizable phone network that works with all kinds of devices and applications; wait for independent developers to come up with the killer app; then sit back and watch the customers roll in.

Like the big telcos, Ribbit employs networking equipment called switches to hand off calls made from its users to the rest of the telephony world. However, all similarity to the big telcos stops there. Ribbit is employing its own customized switches, which are designed to broker calls between a number of different devices, not just phones.

Users of the service can make calls to and from landlines, mobile phones, internet telephony software running on their PCs, desktop widgets, social networking applications, Flash-based phones and even web browsers.

Rather than create a dominant interface for all these potential access points, Ribbit has turned the keys over to more than 600 third-party developers, creating a developer site that offers help on linking applications and devices to the Ribbit network. It's a move that's proving remarkably popular lately, with startup efforts such as the Google-backed Android as well as established telcos like Verizon Wireless all offering "open" platforms to programmers. But few companies have given them as much latitude as Ribbit promises.

"We want developers to be able to use telephony to make money," says Ted Griggs, the CEO of Ribbit. "There's no door closed on this API for them. They have access to the guts of everything."

For developers this means a lot of flexibility. Projects like Flash versions of the iPhone designed for the desktop are already up and running. More pragmatic products like Ribbit's speech-to-text application for Salesforce are already starting to pop up, too. In short, with the right tools at their disposal, developers can create any number of mashups incorporating telephony features.

From a business standpoint, the question is whether the combination of Ribbit's connectivity options and developers' products will be enough to entice consumers. As it stands, the company will profit by providing developers with a billing platform for the service and assisting them with marketing and distributing the apps. However, the developers aren't the only ones paying in -- on the consumer side there's the cash cow of airtime.

Industry analysts like Brett Azuma, a senior vice president at Ovum, a telco consultancy, still question Ribbit's solvency. "Unless there's a foolproof way to get the products out there and make them successful," says Azuma, "I think the consumer applications are a little unclear for now."

But Ribbit's executives believe that giving developers the reins will ultimately attract customers, allowing the service to outpace the telcos in terms of innovation.

Only time will tell whether a developer-friendly ecosystem will be enough. In the meantime, analysts like Azuma are staying cautiously optimistic. "Being able to use text-to-speech transcription services and archive voice calls are many of the features that consumers have shown interest in over the years," he says. "However, whether or not they're willing to pay for these features is going to be the big question."