Nortel Strong Arms Open Source Vendor

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Nortel Strong Arms Open Source Vendor

What happens when a VoIP blog (yours truly) writes about the fact that a former Nortel subsidiary (Blade Network Technologies) went looking for a new phone system, chose an open-source Asterisk-based solution from Fonality instead of using Nortel's own PBX and then agreed to go on record on the VoIP & Gadgets blog about why they made such a shocking decision?

A) Nothing - it's a VoIP blog - who cares? Nortel is an $11 billion dollar company that certainly doesn't read blogs for their news.
B) Nortel reads the blog post, is a little peeved, but other than some emails sent internally, no one outside Nortel would ever know they were annoyed.
C) A Nortel Board Member flips out over the article, contacts Blade and then pressures Blade to return the Fonality system and have Fonality print a retraction to the blog article (and the subsequent press release).

If you answered C) congratulations, we have a winner!david vs. goliath nortel vs fonality Yes, it's true - and in true David (Fonality) vs. Goliath (Nortel) fashion it would appear that we have Nortel peeved that one of their former subsidiaries chose an open-source IP-PBX (PBXtra from Fonality) and who had the audacity to speak to the press about why they made such a decision. Why, the nerve!

Although they are a former subsidiary of Nortel, I should point out that according to, Nortel still has a minority interest in Blade. Interestingly, according to Blade's website, Eric Schoch, the Vice President of Business Development for Nortel, serves on Blade's board of directors.

As if we needed any more proof of the power that the blogosphere holds, the fact that a Nortel executive took exception to my blog post and contacted Blade to apply pressure is almost beyond belief. I spoke with Fonality's CEO, Chris Lyman to get the exact facts from his perspective. Here is my phone conversation with him transcribed:

Chris explained, "Fonality sells it's PBXtra IP PBX to Blade. During the sale, Blade's Director of IT, Amon Prasad agrees to go on record in a Fonality press release about why he made this decision against his parent company. Then you (Tom) decided to do a story about such an interesting customer win."

Chris continues, "Here is where it gets interesting. The day after your story hits the net, Fonality gets a panicked call from Stefan Zuckut, Blade’s Vice President of Corporate Development. Stefan tells us that a board member from Nortel read your (Tom Keating) blog and hit the roof. "

Chris explains, “Well, Stefan must have been telling the truth, because 30 minutes later, the CEO of Blade, Vikram Mehta, is demanding to speak with me personally. I acquiesce. When Vikram gets me on the phone he immediately tells me that Blade is going to return their brand-new, still-in-the-box phone system. I ask, 'Why are you returning?'" To which Vikram replies: “We changed our mind.’

“You can’t change your mind. That’s not how our terms and conditions work.” says Chris, and then continued, "The next thing out of the Blade executive’s mouth astonishes me “We also want a retraction of your press release about how the Fonality system was more affordable and easier to use than Nortel.”

Stunned, Chris asks, “Why?”

“Because you didn’t follow our internal process for authorizing a press release.”

“But it is *your* internal process, and we spoke, with permission, to your own Director of IT, who personally signed off on the release. All that press release said and all Tom Keating's article said was that we're less expensive and easier to use than Nortel. What you want me to publish a document that we're more expensive than Nortel and harder to use? How the heck do you expect me to print a retraction for something that is a) true and b) out of my control now that it is in the blogosphere?”

I interrupted Chris's retelling of the conversation with Vikram and asked Chris, "How long have they had PBXtra for?"

Incredulously, Chris responds, "They haven't even installed it yet. It's still in the box."

I responded, "Right. I recall when speaking to Blade's Director of IT last week that he explained Blade hadn't deployed it yet, but were excited to do so."

After Vikram pressed Chris for a retraction, Chris in an irate mood, issued an ultimatum - "You have 60 seconds to change your mind. If within the next 60s you don't change your mind, you're going to discover how an incident turns into a scandal. Because either way, any reporter worth his salt is going to find the fact that Nortel's board of directors is putting pressure on you to get us to print a retraction about the comparative price of our systems much more juicy than the stupid article in the first place. This is getting better all the time and it's good for us and bad for you."

Chris told me they got so upset they hung up on him before he got five seconds into his count. I asked who was on the call and Chris said it was Vikram Mehta, Blade’s CEO, Stefan Zuckut, their VP of Corporate Development and Jim Sladek, VP of Finance.

Chris told me, "That's when I called you Tom on Friday to tell you about what was happening."

Chris, "Then I told Arnold, my SVP to play good cop. Call them back and tell Blade that my CEO (that’s me) is chain dialing the press. All they have to do is call off the dogs about us printing a retraction and returning the system and everything will be fine. We won't even talk about the little incident."

According to Chris, "Blade came back within an hour and changed their mind about returning - agreeing to keep it and be friends and we're sorry. Everything was lovely. That was all on Friday. Well, I came in this Monday morning and they've again decided to return the unopened system. The reason quoted in the RMA ticket is: “Poor customer service, Arnold Waldstein.” Chris laughed, "Arnold is our SVP of Marketing. Ha!"

I asked Chris, "So they let me get this straight. They changed their mind a second time? They flipped on the flip-flop?"

Chris acknowledged, "Yes, they re-changed their mind again. This is a bit of a watershed event when big big iron like Nortel calls Blade to pressure little ole' Fonality into printing a retraction of what is absolutely the truth from inside their own company. And that company goes crazy at the executive level and makes 3 decisions within 24 hours - to return it, then to not return it, then to return it again."

I contacted Blade's Stefan Zuckut their VP of Corporate Development, to get their perspective. I explained who I was and said, "I was the one who wrote the Blade & Fonality story and I was wondering if I could have your comments on what transpired between yourself, Fonality and Nortel?"

Stefan replied, "I cannot comment on that, but I'd be happy to have our CEO give you a call." I then asked, "What's you're CEO's name?" and Stefan said, "Vikram Mehta, but he's in a meeting right now, is there a way of reaching you?"

I gave my contact information, but no one called me back so I called back a few hours later and this was my conversation with the Blade's CEO:

Tom:  Hi this is Tom Keating with Technology Marketing Corporation. I was the one who wrote the Blade & Fonality story and I was wondering if I could have your comments on what transpired between yourself, Fonality and Nortel?

Vikram: <pause> I'm not quite sure I know what you're talking about.

Tom: I spoke with Chris Lyman and he mentioned that your Director of IT was pretty pleased with the Fonality system and I was wondering what changed over the weekend as far as far as why you are no longer using their solution?

Vikram: <long pause. sighs> I'm not... First of all, I'm a little concerned about getting into details about what we do on a day-to-day basis and our commercial relationships with Fonality and Nortel are in confidence, so...

Tom: So basically you're answer as to why you decided to return Fonality is -- "no comment"?

Vikram: I didn't say that. You said that.

Tom: Well I'm just trying to understand why your Director of IT very much loved the Fonality solution and then as the result of my article resulted in you guys changing your mind.

Vikram: <again repeating himself> Like I said, our relationship with our suppliers and customers are commercial-in-confidence and I don't want to be getting into any details about what we're doing with Nortel and likewise I don't want to be getting into what we are doing with Fonality. That is my comment.

Tom: Well Fonality gave me the green light to talk to you. They were very open and honest as far as their position so I'm just trying to get what your take on it is.

Vikram: I can't speak for what Fonality told you and what they did not, but like I said my position is that our relationships with our customers and suppliers are commercial-in-confidence.

Tom: Chris gave me the green light to speak about the relationship with you. He mentioned you spoke with a Nortel board member. If you let me know the contact information at Nortel, I can speak with them and find out if they would be willing to give me the green light as well.

Vikram: Our relationships, like I said, with customers and suppliers are commercial-in-confidence. I am not at liberty to divulge what we are doing with anybody.

Tom: That's fine. So if you like I can contact Nortel directly and get their perspective and they can either comment or no comment. If you just give me the person to speak with I can get their position.

Vikram: Don't know that I can point to... uhhh. Don't you have public relations contacts at Nortel?

Tom: Yes I do, but it's a big company, but I don't know who exactly you spoke with at Nortel, so I wouldn't know who to refer to. I would need a specific person for me to contact their PR firm about. So is there a specific person on the board at Nortel you spoke with?

Vikram: Like I said, our relationships with our customers and suppliers are commercial-in-confidence. I cannot divulge anything about our commercial relationship with our customers and suppliers.

Tom: But I'm not asking you to divulge the relationship, I'm just asking to speak to Nortel.

Vikram: Go right ahead.

Tom: But who do I speak with?

Vikram: I wish I could help you.

Tom: Ok, so did Nortel offer anything in exchange for you returning Fonality's PBX. Was there a quid pro quo?

Vikram: I don't even know what you're talking about.

Tom: According to Chris Lyman you said you were returning the Fonality system.

Vikram: Like I said, our relationships with our customers and suppliers are commercial-in-confidence and I'm not in a position to divulge anything about our commercial relationships with anybody. Whether that is Fonality, Nortel, other customers, suppliers who we do business with. I'm not in position to speak about any of that stuff with the press.

We spoke a little more, but as you can tell, I was getting nowhere with Vikram. However what "wasn't said" spoke volumes -- both from his demeanor and his avoiding answering my questions, in my mind confirmed what Chris said was accurate. I then contacted Nortel to get their perspective. I spoke with a Nortel employee who wishes to remain anonymous. He stated that Eric Schoch, the Nortel board member was travelling and therefore wasn't able to get him to respond.

The employee did however admit that he was aware that Eric sent Vikram (CEO of Blade) a note about the Fonality press release where it simply stated "I would appreciate seeing copies of any news releases that have our name 'Nortel' in it before they go out." The Nortel official explained, "Anything that uses our trademark name we like to take a look at it." The employee added that he was not aware of any pressure applied by Nortel to have Blade reverse their decision on selecting Fonality or forcing a retraction.

Let's tally the score to try and figure out who is lying and who is telling the truth. Chris Lyman and Arnold Waldstein from Fonality claim that Vikram called them and stated unequivocally that a Nortel board member was very upset over the blog article and press release and as a result Blade demanded a retraction and a return. When I contacted Vikram at Blade, he was evasive, wouldn't set the record straight, and simply hid behind "customer-in-confidence".

Finally, I contacted Nortel, and although the board member in question was not available for comment, the Nortel representative admitted that an email from Nortel's Eric Schoch was sent to Vikram. Nortel claims however they were simply upset that Nortel was not consulted for approval in the issuance of the press release. So let me get this straight - this whole story is simply about not giving Nortel a heads-up on a press release wherein Nortel doesn't exactly come out smelling like a rose resulting in Blade demanding a retraction and returning Fonality's PBXtra? C'mon!

Just to put this all in perspective, according to the latest research I've seen, Nortel's market share has declined from 29% in the fourth quarter of 2004 to 17% in the third quarter of 2005, according to Merrill. With Nortel's slipping marketshare is the new way of retaining marketshare by strong-arming or pressuring open source PBX rivals from telling their successful stories to the press/media including blogs? While I cannot confirm this is the case with 100% certainty, it certainly is quite suspicious. As Chris stated, this is indeed a watershed event for open source telephony.

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