Company: e-tel Corp.
Headquarters: West Warwick
President: Matt Lukens
Employees: 18
Year founded: 1999
NEXT TO SOME EQUIPMENT is e-tel Corp. president Matt Lukens.
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
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Entrepreneur Matt Lukens is convinced he’s found the next big thing. The 49-year-old Lukens has founded or helped start a half-dozen successful technology companies here since the early 1980s, and he’s confident that e-tel Corp. is poised to take advantage of a coming revolution in telecommunications.
The venture capital-backed West Warwick company makes telephones that work like computers.
A traditional telephone converts the caller’s voice into a continuous electrical signal which is transmitted through telephone lines to another telephone where the signal is converted back into sound again on the fly. The process, called “circuit switching,” ties up the caller’s telephone line and parts of the telephone network for as long as the call lasts.
By contrast, the Internet is based on packet switching. That is, words and images are digitized and chopped up into small chunks of data that find their own way to the receiving computer amid all the other packets traversing the Internet. It’s like sending a series of post cards, each containing one word of a sentence, through the mail to the same address.
One advantage of packet switching is that it doesn’t tie up telecommunications lines. Packets headed for different computers can be mixed together on the same lines regardless of what kind of data they carry–just as letters in a postman’s bag can.
That’s where e-tel comes in.
The company’s ordinary-looking beige telephones transform the caller’s voice into packets according to the rules of Internet Protocol. The IP telephones could be used to route calls over a private company network or, eventually, the Internet. Although Internet calling is possible today the sound quality is often poor because of network congestion.
“Grandma comes out sounding like Mickey Mouse or Donald Duck,” Lukens joked.
But backers of IP telephones point to research from market forecasters such as International Data Corp. in Framingham, Mass. The company’s analysts expect revenues from IP calling to shoot from $480 million today to $19 billion by 2004.
That wouldn’t surprise Lukens.
“There is a huge financial imperative to change from circuit-switched to packet-switched,” he said, noting that telephone companies have to spend about $25 per customer to buy a multimillion-dollar traditional switch while the IP equivalent costs less than $2 per customer.
Lukens believes some form of major standardization has characterized every generation in the last 200 years. For example, the various railroads settled on a single gauge of track in the late 1800s. Before then a given train couldn’t use all the tracks in the country because they were different.
Today, voices can’t use the same information tracks as other sounds and images and text do. Lukens can listen to a Brazilian radio station over the Internet from his home computer, but he must use an entirely different network to call his wife from work. He expects IP calling to change that soon enough.
“IP is going to be ubiquitous,” he predicts.
THE FUTURE OF TELEPHONE COMMUNICATION might be found behind this company logo.
For now, though, e-tel is just trying to get in position for the anticipated move toward IP calling.
The fledgling company reached the break-even point in March, when it won a major contract to license its IP calling technology to California-based Coyote Network Systems Inc. Lukens said the licensing agreement will be worth about $2 million this year and as much as $20 million in 2001.
The company also boasts a marketing agreement with telecommunications giant Lucent Technologies Inc. of Murry Hill, N.J., and a memorandum of understanding with chipmaker Intel Corp. of Santa Clara, Calif.
“If you run down the Top 10 tech companies, we’re working with most of them,” Lukens said.
The company also is supplying some equipment to international telephone service providers for use in developing nations that don’t have extensive telephone networks, but Lukens said e-tel is a software company at heart.
“The phones are just empty vessels that we fill up with software,” he said.
Lukens would like to take e-tel public, perhaps as early as next spring, the recent free fall of technology stocks notwithstanding.
But it’s hard to say what Lukens might do then.
“I usually last three to five years, and I’m done,” he said. “I like the excitement of getting it started up. I like the mental overload of starting it up.”
Lukens founded Cadre Technologies, a Providence software maker, in 1982. He sold the company soon after and repeated the process with Reif Communications in East Greenwich. He helped out with another startup in 1985 before founding Watchhill Research.
Lukens formed Watchhill in April and sold it in November. Next he was tapped to turn around a troubled company called Acquidneck Systems, but Lukens wasn’t able to get the company back on track, he said.
While he waited for five-year noncompete agreements to end, Lukens founded a company that made temperature monitors for the electric power industry. The noncompete agreements ended in 1998, and he started e-tel in 1999.
The company has 18 employees today, and Lukens is trying to expand e-tel’s ranks to 30 by September if he can find the people he needs in today’s super-tight labor market.
