Article Excerpt:
TWST: What is eLEC Communications?Mr. Riss: eLEC is a provider of voice over Internet Protocol (VoIP) services to residential and small business consumers, telecommunication service providers and cable operators. We also provide standard wireline telephone services. In telecom, externally, it is all about the price and quality of the service package; internally, it is all about fixed, variable and customer acquisition costs. Our VoIP services are supported by a proprietary Linux-based SIP technology that is ultra cost-efficient, high quality, feature-rich. We also utilize a 'server- farm' network architecture that deploys in relatively small capital increments. This architecture has very positive implications to cash flow, scalability and reliability.
TWST: Give us an idea of what the competitive landscape is. Is that
landscape driven by cost or other issues?
Mr. Riss: We compete in two areas ' wholesale business and retail
business. Both of these areas are driven by cost and quality. We've
identified 1,100 cable companies that are small, independent and all
looking for a VoIP solution. Many are already providing high-speed
Internet access to their customers. It is natural for them to up-sell
their Internet subscribers VoIP services before someone else does; we
provide it to them on a private label basis. Under our private label
program, we give them their own customer support Website branded with
their logo, so their customer thinks that they are the carrier. The
gross margins are less than retail, but here we have no customer
acquisition, customer premise equipment or customer service costs. In a
lower margin wholesale scenario, our facilities are breakeven at
approximately 25% capacity utilization. We believe we will also attract
CLECs and ISPs, because we can give them instantaneous time to market
and our cost structure will permit us to underpin their VoIP services
more cost-efficiently than they will be able to themselves, even after
they achieve scale. In addition to wholesale customers, we have retail
customers who we sell to directly, through telemarketing, online
advertising and affinity marketing. We recently launched a program that
will make the cash-flow consequences of customer additions under $20.
This program should lead to explosive growth in our highest margin
business segment and require small amounts of capital to create
substantial revenue growth. The margins on retail are substantially
higher than wholesale; our facility breakeven point is well under 15%
capacity utilization when our servers are populated with retail traffic.
Tickers included in this excerpt: ELEC
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