September 27, 2006 11:33

The Internet changes everything, including phones

I had lunch yesterday (paid for, don't you worry, by the long-suffering shareholders of my employer, Time Warner) with the new CEO of Avaya, Lou D'Ambrosio.

Avaya was the dowdy stepchild of Lucent, spun off in Oct. 2000 so the glamorous parent could concentrate on "next-generation communications networks." The Internet was changing everything, so Lucent stuck Avaya with pre-Internet businesses like telephones and voice mail.

What's happened since? Lucent imploded. Avaya, while it has certainly had some troubles of its own, has done an awful lot better.

This sounds a little bit like what's been going on lately with Viacom and CBS, where the supposedly slow-growth half of the company has outperformed its glamorous former spouse since the two broke up at the beginning of this year. That makes two examples of the duller party prevailing in a spinoff, which is tantalizingly close to three, the magic number at which journalists are officially allowed to declare the existence of a trend. It's better to be dowdy! It's better to be dowdy!

But D'Ambrosio, who was head of global sales and marketing for Avaya before taking over as CEO in July, steered me in a different direction. It wasn't dowdiness that saved Avaya, but VOIP. Four years ago, he said, 20 percent of new business phone lines used voice-over-internet-protocol. Now it's 60 percent.

The initial selling point was that VOIP costs a lot less than conventional phone service. But VOIP also makes phones vastly more versatile, allowing Avaya to sell all sorts of add-on services. D'Ambrosio regaled me with tales of how the Avaya phones at Wynn Las Vegas steer guests to the hotel/casino's fancy shops. Jocelyne Attal, the Avaya chief marketing officer who was also there at lunch, tried to interest me in linking my Avaya office phone to my cell phone. (No thanks!)

So yeah, the Internet did change everything. What Lucent missed was that one of things it would transform was the telephone.