American History 1988
Chapter 176 - 170 Joint Venture Company

Chapter 176: Chapter 170 Joint Venture Company

Cheap by 40%~80%? Both Dean and Durell were shocked by this data.

They had considered the low cost of network telephony, but never imagined it would be that much lower.

"Has MCI done a financial budget for this business?" Such detailed data didn’t seem like a mere oral estimate.

"Of course," Dave did not deny it, "Don’t forget that MCI has its own fiber-optic lines, and we have also procured some Teams software."

"Thank you~" Encountering his own clients, Dean didn’t forget to express his gratitude.

However, at that moment, what Dean was pondering was still that 40%~80%. The cost of long-distance phone calls in America had always been very expensive, hardly changing throughout the years.

This had to do with the huge initial investment costs and, of course, with the monopolistic nature of the phone companies.

"Dave, I need more specific data. How much cheaper is long-distance network telephony compared to traditional telephony?" Dean’s eyes flickered, wondering about something.

"With the current conditions, we can be almost certain of 40%," Dave gave a relatively accurate answer.

"Does that mean local calls could save at least 80% of the fees?" Dean quickly surmised the cost of local calls from the data he had just reviewed.

"Exactly, as long as the infrastructure is in place, local calls within the city would have virtually no cost." This was something traditional telephony could not achieve.

Taking MCI’s pricing standard as an example, long-distance calls would cost 88 cents a minute. If it were replaced with network telephony, this price could drop to about 52 cents.

Traditional local calls would cost 11 cents a minute, yet in the realm of network telephony, one could profit even at 2 cents a minute.

Without a doubt, in terms of cost alone, network telephony indeed brought a paradigm shift to traditional telephony.

Traditional telephony required laying of special phone lines and a large number of switches to handle data.

As for network telephony, a single terminal capable of accessing the internet sufficed, which was its only hardware cost.

This access terminal could be the computers of today, or the future’s mobile phones or other portable devices.

Internet cables are part of infrastructure projects, something Byte Company need not worry about. Network data exchange centers would also be managed by the various operators.

After careful calculations, Byte Company would hardly need to invest anything to start a network telephony business.

Well, Dean had already thought of countless ways to make money using this function.

But the conditions weren’t ripe for the time being since the internet had not yet become widespread and the scale of online service providers was not large enough.

Yet, he wasn’t without options, such as the MCI in front of him, which could compensate for Byte Company’s lack in hardware.

"Dave, I think we can talk about a partnership in the network telephony business," he suggested.

"That’s exactly what I had in mind," Dave snapped his fingers, "Regarding the partnership, my suggestion is mutual licensing."

Dean’s eyebrows raised; MCI’s appetite was bigger than he had anticipated. "Please elaborate."

"AT&T’s lawsuit against Byte Company’s ADPCM technology could be completely replaced with MCI’s voice encoding technology.

Any decently-sized telephone company has its own encoding technology.

The difference is merely who gets adopted as the standard, but there isn’t much difference between them in terms of call quality.

By adopting MCI’s voice encoding technology, Byte Company would no longer face any trouble, and the lawsuit by AT&T would be readily resolved.

In exchange, Byte would license us their voice call technology.

Of course, to compensate for the disparity in value between the two, MCI could pay a portion of the profits from the network telephony business as a royalty.

In addition, MCI would pay an annual licensing fee to Byte Company’s account.

Even to expand the market share of Teams software, MCI could assist it in making voice calls between different companies.

You know, Dean. This would allow Teams to practically serve the function of network telephony, but this feature would be limited to computers."

This was the goal of the cooperation that Dave, or rather MCI, had come to discuss with Dean.

Each party would get what they needed and at the same time, it could be a blow to their old rival AT&T. Why not?

However, MCI’s appetite was big, Dean’s was even bigger.

A voice encoding technology with a patent expiring in three years was definitely not an equal trade for the network telephony market.

As for the royalties? Not a chance!

Without involvement in the project itself or a say in it, how much of the royalties to receive was still up to someone else’s discretion?

A Hollywood blockbuster that raked in huge box office numbers could still have its accounts rendered into losses, much more so for monopoly telephone companies.

As for the annual fixed licensing fee, it’s unlikely that MCI would have a large budget for that.

The market for network telephony from PC to PC was even less appealing to Dean.

Any discerning person could see that even with network telephony, the potential in the landline market was greater than that in the computer market.

After all, computers are too cumbersome, not as convenient as landlines.

And the unparalleled convenience of future mobile phones would be even more lethal. They were the platform where network telephony would truly shine.

Dean did not immediately answer Dave’s question. Instead, he pulled Durell aside for a private conversation.

To negotiate with MCI, a unified stance within the company was essential.

KeyPoint Ventures was the third largest shareholder of Byte Company, and Dean needed his support in presenting a united front.

Having briefly explained the potential of the network telephony market, Durell was even more aggressive than Dean.

Had Dave not been present, he would have even considered operating independently at Byte Company.

But that was hardly realistic, as Byte Company was still too small.

Having already offended AT&T, if they started promoting network telephony openly, they could indeed be targeted by all phone companies.

Negotiations, put nicely, are called win-win cooperation; frankly speaking, it’s finding a boundary for mutual compromise.

After a brief conversation with Durell, Dean returned to the bar, "Dave, regarding cooperation, I have another suggestion."

"I’m all ears," Dave didn’t mind hearing out Dean’s ideas.

After all, the latter had founded Byte Company, and his foresight in business creativity had surpassed most people.

"As you just mentioned, IP telephony has great potential. And Byte Company’s accumulation in digital voice technology surpasses most companies in the world.

Teams is unique, its voice communication technology, transmission technology, compatibility technology, and encryption technology are all unparalleled.

And IP telephony requires these technologies, which are completely different from the analog signals of traditional telephones.

So my proposal is, why not come together to form a company that operates the IP telephony business independently?"

The so-called licensing fees pale in comparison to directly entering the market and getting a share of the pie.

Byte Company has been established for such a long time, and it’s not just selling software.

Its internal technical team has been constantly updating and iterating various aspects of digital voice technology.

After all, this is an entirely new field, and the accumulation of technology requires long-term investment.

Even so, Byte Company still leads the industry, and Dean wasn’t exaggerating.

After hearing Dean’s suggestion, Dave’s brows furrowed subconsciously, as this was quite different from MCI’s internal plans.

"Form a joint company? As far as I know, Teams’ voice technology is already sufficient for our use."

"No!" Dean shook his head firmly, "It’s far from enough; trust me, Byte Company can do much more.

If we form a joint company, MCI handles the hardware part, and the rest is ours.

The voice technology, software, and communication protocols will all be developed by Byte Company, and I even have a specific product prototype in mind."

"Come on, prove it to me," Dave needed more concrete information to be convinced.

"IP telephones or IP phones!" Dean already had a name for the product, "In terms of appearance, it resembles the current desk phones.

However, the working principle is different because the IP phone is connected to the internet, and the digital voice packets it transmits are fundamentally different from analog signals.

And since it’s connected to the internet, Byte Company can implement many more functions on an IP phone.

For example, allocating a fixed number to an IP phone, easily sharing contact lists between multiple accounts, and even tying them to email accounts."

"Hold on!" Dave had to interrupt Dean, "A phone that can share contact lists? And link with an email account?"

This was too fantastical to imagine, Dave found it hard to believe that a desk phone could have such capabilities.

"I admit some functions still require further technological validation, but there are a few that can be implemented right now."

Under Dave’s inquisitive gaze, Dean didn’t keep him in suspense.

"Caller ID, conference call capabilities, secure encryption!"

Current traditional phones lack caller ID because they use primitive analog signals.

But transmitting data is one of the internet’s most basic functionalities, so displaying the caller’s number on a network phone would be easy.

It may seem like a trivial feature, but for Dave and his colleagues, it was already a significant technological breakthrough.

Knowing the caller’s number in advance provides users with the opportunity to choose whether to answer.

It’s convenient and practical.

As for conference calls, this is Teams’ specialty. For Byte Company, there is no technical challenge.

Traditional desk phones can only handle one-on-one calls, another advantage of IP phones.

Secure encryption is a perennial theme of the internet, and Byte Company is also investing in its research.

Due to the complexity of digital signals, this area offers much more reliability than traditional phones.

"MCI already has suitable fiber optic lines, what remains is just to manufacture and sell terminals fit for IP telephones.

Byte Company will take care of features like caller ID. Look, the business opportunity is within reach!"

Honestly, Dave was indeed tempted by the scenario Dean laid out, which was even more appealing than what MCI had envisioned.

With a very low usage cost, and a variety of features, there’s no doubt that IP telephones are market-competitive at the moment.

Although limited by the extent of internet penetration, at least in areas like Virginia, Illinois, and Missouri, MCI has its own fiber optic lines.

This means that some places already meet the conditions for using IP telephones, which made Dave even more excited.

While IP telephony may impact the traditional telephone market, technological advancement won’t change for any individual’s will.

If MCI doesn’t plan ahead, the future impact will only be greater.

Moreover, Dave believed that IP telephones and traditional phones are likely to coexist, and one won’t completely replace the other.

They each have their advantages and disadvantages, and to some extent, can complement each other. Since it’s all business, why shouldn’t MCI get involved?

"Dean, you know I can’t make this decision on my own.

I need to go back to Washington headquarters and consult the board, but don’t get your hopes up too high..."

Drip...drip...drip...

Dave was cut off before he could finish, as Dean’s Motorola on the table interrupted their conversation.

Apologizing with a look, Dean picked up the phone and walked aside.

After talking for a few moments, Dean came back with an easy smile on his face.

"What happened?" Durell picked up on the smile on Dean’s face.

"The northern district court just announced the hearing results," Dean’s relaxed expression caused Dave to tense up.

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