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Net Phone Firms Plan Local Service: U.S. Start-ups aim to Voice over High-speed

Vonage In Print News 
By Tyler Hamilton

At least two U.S.-based companies will begin offering local phone service through high-speed Internet connections this year as part of a trickle of competition entering the Canadian telecom market.

"Barring any major obstacles, we will be in Canada at the end of this year," said Jeffrey Citron, co-founder and chief executive officer of Edison, N.J.-based Vonage Holdings Corp.

Citron was in Toronto yesterday pitching his business at a Merrill Lynch analyst conference.


Vonage currently has more than 35,000 customers in the United States signed up for its broadband telephone service, which is based on Voice over Internet Protocol, or VoIP. It is the largest among a group of U.S.-based start-ups, such as 8x8 Inc. and Deltathree Inc., which are providing broadband phone services.

For a flat rate of $39.99 (U.S.), Vonage's U.S. customers receive unlimited local and long-distance services to anywhere in North America, including six free "touch tone" services such as call waiting and caller I.D.

"It truly is a disruptive model," said Lawrence Surtees, senior telecom analyst with IDC Canada Ltd.

In the past, people have been able to make phone calls through the Internet using their PC or by dialling a special calling-card code, often with questionable quality and reliability. Subscribers to the Vonage service can make unlimited voice calls through an existing broadband cable or DSL connection using a regular phone, essentially eliminating the need for a traditional and typically more expensive local line.

Citron said his company is adding 1,500 new customers a week and anticipates having 1 million subscribers within three years.

Testing on the Canadian service will begin this fall, with small businesses on the Canada-U.S. border being the initial target. Early next year, the company will launch a broader consumer product with a Canadian partner. Names that have emerged include Rogers Cable Inc., Call-Net Enterprises Inc. and Allstream Inc. (formerly AT&T Canada Inc.).

"We definitely have had meetings with Vonage," Allstream CEO John McLennan recently told the Star. John MacDonald, president of Allstream, has been testing Vonage service at home for several weeks and is a fan.

Bell Canada could conceivably use the technology to expand its local service in the west or stay competitive on its home turf against other Voip offerings. Likewise for Telus Corp.

Vonage is looking to partner with a network provider that has a strong distribution network, said Citron. Rogers Cable, which intends to enter the telephone market, could market and sell such a service through its Rogers Video stores. Surtees said the potential for the technology to "disrupt" the market doesn't mean instant success, adding that there's no proof yet that high-quality Voip can be deployed profitably and be compliant with 911 service and other regulatory requirements.

"The players with stars in their eyes have to sit down and ask how they're going to make money," said Surtees.

Another company eyeing the Canadian market is and its yet-to-be-launched Voiceglo service. is perhaps best known for its initial public offering in late 1998, when Web-dazzled investors bid up the Net company's stock six-fold on its first day.The founders decided earlier this year to reincarnate the near-defunct company as a Voip provider by purchasing Direct Partner Telecom, a company founded by Brian Fowler, 31, of Burlington.

Edward Cespedes, president of Fort Lauderdale, Fla.-based, said the technology developed by Fowler rests at the core of a Voip service that will work over broadband and dial-up connections.

"It's working great," said Cespedes. "We're going to be launching soon. By the end of the summer for sure."

This story also appeared in:
  • Canadian Press, 07/16/03

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