TORONTO – Douglas Lloyd looks relaxed as he leans back in his chair and puffs on a cigar. He grins like a kid who has just put one over on the teacher.
It’s taken 15 years but Lloyd has finally launched a low-cost long-distance phone service through Orbit Canada, a company that he launched in 2000.
Orbit Canada charges its customers a flat rate of $19.95 Canadian for 400 minutes of calling to Canada or the U.S. with no day or nighttime restrictions. It tosses in unlimited dial-up Internet service with five e-mail accounts for free.
The company also offers rock-bottom international calling. Some sample around-the-clock rates: five cents a minute to the United Kingdom, seven cents a minute to Australia and six cents per minute to Hong Kong and Italy.
“We can pretty much call anywhere in the world,” says Lloyd. On its Web site (http://www.orbitcanada.com) the company lists long distance rates to 95 countries.
Lloyd has been taking some bitter lessons from the Canadian telecommunications industry along the way.
He started in the business by convincing companies to replace their telex machines with fax machines. The entrepreneur then noticed the cabling left behind once the Telex was gone in an office and started thinking about telephone networks.
He has since been trying to launch an alternative national phone service in Canada to do battle with the big Canadian telcos. He started in wireless and attempted several times to secure a licence, but the CRTC wouldn’t grant him one. He says he even went as far as using Ontario Hydro towers to transmit calls over microwave. The competition didn’t like it and so they mobilized to put him out of business, he claims. “They attacked me. They demanded invoices be paid immediately and even paid ahead of time. We couldn’t secure the financing in the interim,” he says.
There’s no love lost between Lloyd and the Canadian telecom industry. One telecom analyst who was approached for comment made it clear he did not like Lloyd or his business tactics over the last 15 years, but refused to go on record.
BCE chairman Jean Monty also declined an interview. “This is not the kind of story that Mr. Monty would comment on,” said a BCE spokesperson.
The world changed for Lloyd when the Internet arrived. He discovered it was a platform he could work with because the Internet is unregulated and therefore he doesn’t need the cooperation of government or the telecom incumbents.
Orbit Canada harnesses the Net through a technology called Voice over IP, or VoIP. If you want to toss the acronym around at breakfast, you’d pronounce it Vee-Owe-Eye-Pee.
Here’s how the company’s VoIP service works. You call a local phone number in one of 12 major cities in Canada from your home, office or cellular phone.
Orbit Canada’s magic boxes answer, recognize your phone number and give you a dial tone. Then you dial a long distance phone number. The call is placed to anywhere in Canada or the U.S. and it rings through to your party for as low as 5¢ a minute.
Behind the scenes, the call is transmitted to the magic boxes over analog phone lines. It’s converted into data packets which are then flung across the public Internet. They are received by a magic box – also owned by Orbit Canada – in a city near where the call is being placed. The call is reconverted into an analog signal and a local call is placed to the person receiving the calling.
This all happens in an instant. The calls are clear, though occasionally you get a tiny bit of audible crunchiness. It is nothing you’ll care about especially when you look at your phone bill each month, which can be accessed via the Web. A paper bill is not issued.
VoIP has been a much investigated technology, but it has yet to hit the mainstream because it has been difficult to make reliable. If some of the data packets carrying voice data during a call get lost, then the quality of the call diminishes. There’s also the problem of assembling the data into audio fast enough so that there are no perceivable delays.
Orbit Canada’s magic is in its technology. “The secret is our software. That makes it all work, but we have a lot of secrets,” says Lloyd, who engineered the system that goes into a telecommunications box that switches voice calls between an analog and digital signal.
Orbit Canada has signed a couple of key deals to improve reliability and to ensure that company can scale quickly as demand grows. Cisco Systems, the company that makes industrial-strength networking gear, assembles the boxes and delivers them to IBM which installs them at sites throughout the IBM International Data Network. The network is also used to route calls to major cities. Orbit Canada continues to use the public Internet to get into smaller communities.
Lloyd says Orbit Canada will shake up the incumbent telcos because he can do business much cheaper than they can.
“They’ve amortized their infrastructure over many years. If they turned around and went into VoIP and the bottom dropped out of the LD (long distance telephone call) market how would they pay for it?” he says.
As VoIP comes of age, it will most certainly drive the cost of long distance rates down. “By 2003 we will get to less than two cents per minute in the North American long distance market,” predicts telecom analyst Roberta Fox, president and senior partner at Fox Group Consulting in Toronto.
She likens emerging VoIP long-distance providers to the companies that appeared in the last decade as the long distance market opened up.
“I put them in category as same people who were the resellers in the early 1990s,” she says.
The company, which is a Canadian subsidiary of a Nevada company called Orbit E-Commerce Inc. (NASDAQ: OECI), boasts 10,000 customers. Lloyd expects that to grow quickly.
“We’d like to see it grow by 20 to 25 per cent per month and I think that is achievable without launching major media campaigns,” Lloyd says.
He also plans to launch the service in the U.S.
This month (November 2001) the company will start advertising in a modest way in Canadian newspapers, but Lloyd says most of the subscribers have come onboard thanks to word of mouth. The company also uses multi-level marketing agents to sell subscriptions.
