Telephone Firm Says Internet Right Call

Jim Murphy and Ari Ramezani were always one step ahead of the curve. While they were in college at California State University, Northridge in the 1980s, a friend suggested they go into business together. Murphy already had a pager company and Ramezani sold cell phones. Thirty years later they are still in business together, but now they are owners of Phone Power LLC – a Winnetka voice-over Internet protocol (VoIP) company that is projecting more than $16 million in revenue this year. While ’80s-era Motorolas and bulky pagers have been replaced by cloud solutions for phone calls, the partners say the fundamentals remain the same: think ahead to the next innovation. “We have a knack for looking ahead,” said Murphy, 43. “But we’ve always stayed in our comfort zone. It’s still communications. It’s just the next progression in the technology.” That theory seems to have worked well over the course of their partnership. They were able to sell the cell phone and pager business, Rampage Inc. They used $40,000 of the proceeds to start Extreme Telecom Inc. in 2001, a company that provided DSL service, which at the time afforded the fastest Internet connections available over telephone lines. “I read something in Newsweek and it said DSL was the next big thing and thought ‘Wow, this is something we have to get into.’ I think I wrote a business plan on a napkin,” Murphy recalled. But they didn’t hold on to that business long. Murphy said he could see the limited upside for DSL Internet connections. “You could only expand as far as your cables could go,” he said. “You were restricted geographically from growing.” So, in 2004, they sold their second company and, after working for the new owners for a little less than a year, they ventured into the VoIP market – again financed by the previous sale. Now, Phone Power, which is debt free, has growing numbers of users in Brazil, China and the Philippines as VoIP becomes a preferred method for international calls. The industry is still growing, with Santa Monica research firm IBISWorld forecasting a 17.4 percent increase in the market through 2016. But it’s also a saturated market, with many companies offering cloud-based voicemail and Internet phone services used by both companies and residential consumers. Diane Myers, principal analyst at Infonetics Research Inc. in Campbell, said competition comes from mobile phones in the consumer market and large telecoms such as AT&T Inc. and Verizon Communications Inc. in the business market. “There are a lot of companies in this space so the biggest challenge is volume,” Myers said. “How do you get your name out and how do they build that name recognition?” Navigating the industry Phone Power employs 65 people in its three floors of office space in Winnetka. Most of the company’s Internet hosting is done at server locations around the country, but the sales, support calls and programming take place in its Valley office. Murphy estimates that 65 percent of the company’s phone lines serve commercial clients, who pay a starting rate of $17.95 per month for voicemail and phone services. Sales have grown roughly 350 percent in the last four years, and the company now has about 75,000 customers, with the largest commercial customer alone having 12,000 lines. Servers handle 3 million minutes of voice calls a day. For the partners, it is a long way from the days of going to gas stations and offering free pagers with proof of an eight-gallon fill up. But future growth of their venture will require further expansion. Industry analysts predict that by 2016, VoIP services will be a $36 billion industry, but expect there will be increased competition as personal users shift toward mobile applications rather than traditional land-use lines. “The biggest competition is that people are going wireless only,” Myers said. “Do people even want a landline phone?” The duo said they are preparing for the shift. At the end of last year, Phone Power launched an app for use on iPhones and will soon offer it for Android phones as well. But, for now, users must be subscribers to land lines, something that may change in the future, Murphy said. The firm has also seen boosts in business due to four acquisitions of other Internet phone companies in recent years, most recently BroadVoice Inc., a Boston-area VoIP company. The length of the partnership between Ramezani and Murphy isn’t the norm for entrepreneurs, said Ben Tenn, a senior business adviser at the Small Business Development Center at College of the Canyons in Santa Clarita. “It isn’t typical,” he said. “But when management has the ability to work together really well, and they are able to observe and note each other’s strengths and weaknesses and use them to their advantage, then it’s to their credit.” Both co-founders say their business partnership has been the source of their success, even if it mimics a marriage at times. “We fight like an old married couple,” said Ramezani, 44. “We come from different backgrounds and our views are often completely opposite. But we’ve been together long enough to know that we hold the same values and have the same long term vision for the company.” So what is that long-term vision? What’s the next million-dollar opening in technology? “Well, that’s kind of the secret sauce, isn’t it?” laughed Murphy. “This one has a lot of legs still, I think.”