Vonage Slips Quietly Into The UK VoIP Market

US Provider Slips Quietly Into The UK VoIP Sector

January 13, 2005

By Julian Watson

On 6 January, US service provider Vonage officially started offering voice-over-IP (VoIP) in the UK. But in contrast to the hype surrounding the technology and the company, this was an unassuming launch.

At present, residents and small businesses can only sign up to the service - prices for which start at £9.99 a month - through the Vonage Web site. They get unlimited calling to fixed-line phones in the UK and Ireland, and free benefits including Voicemail Plus, three-way calling and calls to mobiles from 5p a minute.

So why the modest introduction? Hype isn't Vonage's style. In its main two markets, the US and Canada, it waited several months after launch before embarking on a serious marketing effort. It now has more than 400,000 subscribers, having doubled its customer base in the past six months. Customers and critics of VoIP can exchange their views at vonage-forum.com. The emphasis is on engagement with users, not hype.

Rightly so. Although Vonage will see rapid growth in the UK, as in the US and Canada, it can't afford to rest on its laurels. It will be competing with the likes of Carphone Warehouse, One.Tel and Tele2, which have exploited carrier pre-selection to keep long-distance tariffs low. As a result of this price competition, incumbent BT's share of total fixed call volumes has been eroded from 62% in Q2 2002 to 55% in Q2 2004.

Vonage can also count on aggressive VoIP moves by fixed and cable operators either side of the Atlantic. BT, through its Broadband Voice service, is already charging £6.50 a month for unlimited UK evening and weekend landline calls of up to an hour. In the US, cable operator Comcast is set to deploy VoIP capability to 20m homes in 2005 alone. All operators will seek to stimulate high-speed internet adoption by offering VoIP and broadband access bundles, putting pressure on the VoIP pureplays.

But VoIP specialists should avoid competing on price alone; they lack the deep pockets of incumbent operators to win a price war. They should focus instead on developing user-friendly applications and services. Two such devices were vaunted at the recent Consumer Electronics Show in Las Vegas. One, the UTStarcom terminal, will enable VoIP calls from any Wi-Fi hotspot. The other, Viseon's VisiFone, offers such capabilities as video calling, voice and videomail, multi-party calling and visual caller ID. Expect to see both in terminals, which are being positioned as alternative to landlines, in 2005.