8x8 2006 Annual Report Download - page 7

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Santa Clara, California and have outsourced call center operations in Syracuse, New York, Iowa City,
Iowa and Santa Maria, California. We are also investing in significant upgrades to our existing back
office infrastructure to enhance the support we can provide to new and existing subscribers, as well as
our distribution partners. In an emerging industry with world-changing technologies, we are focused
on our customers and their experience with Packet8.
• Develop additional distribution channels. We have established relationships with resellers, retailers
and other distributors of telecommunications products and services. To further accelerate growth of
our Packet8 residential and business offerings, we intend to build upon our existing relationships and
establish new relationships with distributors, value added resellers and system integrators, other service
providers, equipment manufacturers and retailers to make our products more readily available and
accessible to potential customers of our services.
Our Packet8 Solution
Packet8 is an Internet-based communication service that works over virtually any high-speed Internet connection in
the world, and allows calls to or from any phone in the world, whether that phone is an IP phone or a regular public
switched telephone network, or PSTN, phone. Packet8 utilizes IP communication endpoints (i.e., a broadband
phone adapter) which, when used in conjunction with the Packet8 network software and any standard telephone,
enable plug and play installation and a familiar dialtone user interface. The Packet8 service also uses web-based
technologies to enable account setup, account management, billing and customer support. We have developed a
significant amount of the technology underlying our Packet8 service, which works with third party carriers to
terminate VoIP calls on the PSTN network. As part of the Packet8 service, we currently resell private-branded
telephone IP terminal adapters, which allow a regular analog telephone to be connected to an IP network, IP
telephones and videophones, and preprogrammed business telephones. These devices, some of which are
manufactured by certain of our former semiconductor customers, utilize our licensed semiconductor technology and
certain unique software modifications to the protocol and application code that enable them to connect to 8x8’s
Packet8 IP services platform. The designs of these devices are based on our former semiconductor reference
designs. We continue to enhance and develop new functionality in the software code that is embedded in these
devices.
Products and Services
PACKET8 VoIP & VIDEO TELEPHONE SERVICE
Our Packet8 VoIP telephone service was introduced in November 2002. Customers enter into a service agreement
with us, and select a calling plan based on their anticipated use of the service. Service plans provide various minutes
of usage, up to unlimited, for calls in North America and Canada that are made to non-Packet8 customers.
Subscribers are charged at a per-minute rate for international calls to non-Packet8 customers, and, depending on the
level of plan selected, may be charged for calls to the PSTN if they exceed the minutes allowed under their plan.
Depending on the service plan selected, 8x8 will either sell or provide at no cost to the user the 8x8 broadband
phone adapter or desktop videophone to use with the Packet8 service. Each subscriber is assigned a telephone
number in any of the area codes and underlying rate centers currently offered by the service. We currently offer area
codes in forty-five U.S. states and the ability for a subscriber to port a number from another service provider. All
Packet8 customers receive access to a variety of telephone features, including voice mail, caller ID, call forwarding,
call waiting, 3-way calling, online account management and billing, international call blocking and caller ID
blocking. We currently offer enhanced 911, or E911, service on all Packet8 calling plans with a United States
service address. A Packet8 E911 call is routed as 911 emergency traffic and is accompanied by caller information,
which enables emergency personnel to ensure that callers receive the exact same response that they receive from 911
services provided by landline incumbent telephone carriers. Subscribers may also have toll-free numbers (e.g., 800
numbers or virtual numbers. A virtual number is an additional phone number, which will ring through to an existing
subscriber line. We are also offering video over IP service using the DV326 videophone product which includes all
of the voice features described above plus unlimited video calls to any other Packet8 videophone subscriber
anywhere in the world. As of March 31, 2006, Packet8 residential and video lines represented approximately 81% of
our lines in service.