The Vancouver, British Columbia-based company was founded in 2004 and launched its offering last year, the idea being to combine the cost savings of voice over IP (VoIP) in the backbone with the call quality of conventional circuit-switched (aka TDM) telephony for the first mile.
This approach has the added benefit of being less confrontational to mobile operators, who have very publicly fretted about allowing other VoIP technologies onto their networks, said Bill Tam, CEO of EQO.
The competitive landscape
Tam said companies seeking to offer mobile VoIP currently fall into three categories. First there are the peer player like Skype and Fring, who send their voice traffic over a data network and so rely on the phone being at least a 2.5G (i.e. GPRS) device, he said. Second there are the callback guys like Jajah, where you call their service, tell it you want to place an international call, then you ring off. They set the call up, then ring you back and connect you. It’s not particularly intuitive.
Third there is the calling card offering, whereby you enter some extra digits as an access code to get on their network. This process can be automated, but it still means all the international numbers in your phone book have to be altered to accommodate it, so again it’s not very intuitive.
How EQO works
The EQO service is somewhat different, designed to be more intuitive and, at the same time, using a hybrid model that mixes VoIP and TDM. It works today by a subscriber signing up, either on the Web or via the company’s WAP site, after which they download a 200-kilobyte Java client over the air to their handset. The first time they launch the service, we provide them with some initial credits, $2.50 in the US or two euros in Europe, to get started, then they can top up using Paypal, said Tam.
The first time the client is launched on the handset, it also imports all the contacts in the user’s phone book to avoid the need for re-entering numbers. Thereafter, people on the contact list in the client will appear with one of three icons, Tam explained. A green one means they are also an EQO user and are online; a grey one is an EQO user who’s offline, and an empty icon is a non-EQO user.
The service can be used for voice calls, as well as for SMS texting and instant messaging. Voice calls to other EQO customers abroad cost the caller only local call charges paid to their usual provider. In case the person called hasn’t got their EQO client switched ON, EQO has a feature it calls Nudge, whereby the person who wants to make the call sends a text message asking the other person to launch it. EQO-to-EQO IM messages are entirely free.
If the person to be called in another country is not an EQO user, there will of course be a termination charge for that call, and this is paid for out of the prepaid credits. It is also where the company is making money at the moment, as it charges minimal fees for termination (for people calling from the UK, 1.2 pence, or roughly 2 cents, per minute), yet still makes a small margin them compared to what it is paying the operators.
Tam explained that the system works by putting what he called a softswitch in the cloud, with EQO having designated numbers in each of the countries where it operates, to which the mobile subscriber makes local-rate calls on their regular network, paid to their provider as a regular in-country call. From the softswitch onwards the transmission is a VoIP call, with EQO’s smarts being the proprietary technology to intermingle TDM with internet access to take advantage of traffic patterns, said Tam.
International roaming
To date, EQO is available only for international calls made from the country where the subscriber has their account. The company targets people in SMBs, independents and prosumers who travel around their own country and need to speak to people abroad while doing so, Tam explained.
However, he said, we are planning a traveller’s solution for international roaming, based on multiple SIM cards, which is the way the caller will be able to be local in the other country, though it will have the disadvantage of the call coming from a different number in each country.
Our View
The EQO model is an interesting one on two counts. Firstly, because it avoids extra numbers, since the EQO local number is stored in the client and is thus transparent to the subscribers, making the service considerably more intuitive. Secondly, it avoid confrontation with incumbent mobile operators, for whom it can be said to drive additional in-country voice revenue, as well as, potentially, encouraging more people to sign up to data plans in order to use EQO’s IM service.
Roaming, of course, is a different kettle of fish. It is currently a select club where everybody is making plenty money on termination charges, at least in regions like Europe where there are lots of small countries and international calling is widespread. Tam acknowledges that it will be a challenge for EQO to convince carriers to allow its subscribers to roam and anticipates that, in a worst-case scenario, there may even be the need to find a workaround. Either way, if EQO can do roaming, it will start to attract business folk in the Old Continent and, quite possibly, other parts of the world.
Beyond that, the one question mark over the EQO business model relates to how much money it can actually hope to make. Tam claims it makes a decent margin on the termination charge for calling non-EQO users abroad, even though it charges people bargain-basement rates to do so. He also talks of other chargeable features that it could add into the service, such as cut-rate text messaging, additional information services and the like.
