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Vonage Plans For 2005

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What's Ahead For Vonage In 2005?

January 10, 2005

By Toni Kistner

Cisco/Linksys touts residential IP telephony as the next big thing. A slew of broadband providers from AT&T to Cablevision jump on board to offer flat-rate phone services with compelling new features. What's it all mean for the upstart that started it all, Vonage Holdings? Network World's Net.Worker Managing Editor Toni Kistner discusses the company's plans for the new year with Vonage Chairman and CEO Jeffrey Citron.

Vonage partnered with Viseon in an exclusive deal to offer broadband videophone service. How will Vonage succeed with a product that's never taken off?

We're working with Viseon to solve the problems that have plagued videophones historically. One big concern has been pricing. Videophones have been terribly expensive, not really approachable below $500. The other problem is quality. There just hasn't been enough bandwidth. But conditions in the home have changed. Higher bandwidth is becoming more readily available, compression technologies more advanced. The quality of the phones is now very good, and finally we think we can bring down the price and make it affordable.

How will you bring down the price?

We'll be announcing pricing details soon. But the bigger question in the video telephony world is do people really want this. We think if it's affordable, they do. I guess we're going to find out.

What other hurdles exist for consumer adoption? Fewer than 800,000 Voip consumer lines were installed in 2004, according to In-Stat/MDR. That's still relatively low.

Awareness: It took two decades before there was a cell phone in every household. It wasn't just price or service, it just took time to educate people. The good news with residential Voip is that the adoption rate is much faster. We're looking forward to a robust '05.

But isn't the nature of consumer broadband (typically asynchronous) a big barrier? Download speeds might be 1M or 2M bit/sec, but upload speeds are abysmal for video, 128K bit/sec, maybe 256K. Don't you need at least 512K bit/sec uploads for decent performance? If I get upload speeds of 128K bit/sec and buy your product, I'm going to hate it.

Well, 128K bit/sec would be a little challenging. Some consumers aren't even aware what their upload speeds are. That is an issue.

Is Vonage doing anything to spur service providers to offer higher upload speeds or synchronous service tailored to videoconferencing applications? Isn't the success of your product riding on this?

We do help by educating our customers about bandwidth. The good news is that the industry is moving the speeds up for both uploads and downloads, so this problem is sort of self-correcting. Even so, there is still a lot of old cable plant out there with low speeds, and some operators out there are slow to replace it. The cable guys are giving a lot more bandwidth. Many DSL providers are still running DSL 1, which has limitations.

With big name providers getting into the consumer IP telephony market, what's your strategy to gain market share?

My goal is to be the largest provider, so I have to grow my customer base faster than they do. So far Vonage has been able to do this, particularly in the fourth quarter [of 2004], even with Time Warner and Cablevision factored in.

What's in the company's future?

We don't anticipate being bought out. We're definitely in it for the long haul. We're making enormous investments in our technology, personnel and facilities to accommodate a long period of growth.

What are your goals for 2005?

To continue to increase the number of devices customers can use on our network. Initially, we offered one box from Cisco, then added one from Motorola. We have four different devices from Linksys, devices from Netgear, and we're adding videophones. We want to add newer kinds of devices from different manufacturers so customers can choose different ways to connect their communication system to our network. That means building our adapters into cable and DSL modems, routers, access points, media centers. We can offer a more holistic approach, where one box does everything, as well as a stackable approach, where you add this thing to something you already have.

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†AK and HI residents pay $29.95 shipping. ††Limited time offer. Valid for residents of the United States (&DC), 18 years or older, who open new accounts. Offer good while supplies last and only on new account activations. One kit per account/household. Offer cannot be combined with any other discounts, promotions or plans and is not applicable to past purchases. Good while supplies last. Allow up to 2 weeks for shipping. Other restrictions may apply.

1Unlimited calling and other services for all residential plans are based on normal residential, personal, non-commercial use. A combination of factors is used to determine abnormal use, including but not limited to: the number of unique numbers called, calls forwarded, minutes used and other factors. Subject to our Reasonable Use Policy and Terms of Service.

2Shipping and activation fees waived with 1-year agreement. An Early Termination Fee (with periodic pro-rated reductions) applies if service is terminated before the end of the first 12 months. Additional restrictions may apply. See Terms of Service for details.

HIGH SPEED INTERNET REQUIRED. †VALID FOR NEW LINES ONLY. RATES EXCLUDE INTERNET SERVICE, SURCHARGES, FEES AND TAXES. DEVICE MAY BE REFURBISHED. If you subscribe to plans with monthly minutes allotments, all call minutes placed from both from your home and registered ExtensionsTM phones will count toward your monthly minutes allotment. ExtensionsTM calls made from mobiles use airtime and may incur surcharges, depending on your mobile plan. Alarms, TTY and other systems may not be compatible. Vonage 911 service operates differently than traditional 911. See for details.

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