For all the discouraging talk about voice-over-IP pure-play problems, there are companies succeeding in the space in some unusual ways, such as Momentum Telecom.

The Birmingham, Ala.-based firm began life, like a lot of other competitive service providers, as an unbundled network element platform (UNE-P) player — a company that sold bundled packages purchased at wholesale from an incumbent and then competed with that incumbent, in this case, BellSouth. At its peak, the company had 150,000 lines in the Southeast, about 20% of which were small businesses, with the rest residential.

When the rules that required incumbents to resell bundles of service that included switching expired, Momentum, like a lot of other competitive service providers, decided to give VoIP a try. But the company quickly discovered something others have come to understand over the past two years: The cost of customer acquisition could rapidly jettison a business case.

“We never even took retail VoIP out of test after we tested it for six to nine months,” said Alan Creighton, president and CEO of Momentum. “The cost of customer acquisition was just too high.”

What did work, however, was wholesale VoIP, which has become Momentum’s new mantra. The company has now signed 52 cable providers or municipalities to a service based on a Sonus Networks platform, deployed at the 56 Marietta co-location hosting facility in Atlanta, and distributed media gateways. Momentum expects to grow that to as many as 280 cable players, mostly Tier 2 and Tier 3 providers looking to expand into voice services.

“Our average cable operator today has 5000 to 10,000 video subs,” Creighton said. “We will go to the very small cable operator. As we have gotten into this business, and we’ve been in it almost two years, we have also begun to move upstream to larger cable companies.”

The company has been expanding into serving municipalities looking to add voice services, usually over existing fiber optic networks built for a locally owned utility, said Todd Zittrouer, vice president of sales.

“We have seen that the municipal market is growing pretty largely in the fiber-to-the-premises space,” he said. “There are a good group of municipals out there that have an existing hybrid fiber/coax network, but any of the newer guys that are forward thinking are moving to FTTP — especially in the southeast and West Coast. I would say we are talking to the majority. There are over 100 cities today; we have customers today that pass 4000 homes and customers that pass 28,000.”

To date, the municipal market is “just a sliver” of what Momentum does, even though it is a growth area, Creighton said. One reason for growth expectations is that larger cities of up to 100,000 residents are taking an interest and talking to Momentum.

The company is allowing its retail voice business to diminish through attrition and is not marketing the service, which loses its appeal when rates go up once the wholesale discounts attainable through UNE-P evaporate, he added. The subscriber rolls are down to 60,000.

“Our costs increased by $9 to $10, and we weren’t able to pass that along to customers,” Creighton said. “We are still talking with federal and state officials about this because there are many areas where, if the cable company doesn’t provide dial tone, there is no competition.”

For the near future, however, Momentum plans to sustain its momentum in wholesale VoIP and grow organically, without looking to expand by acquisition as many other competitive service providers have, he said.