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Vonage Customer Review: One month with Vonage, and...
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Vonage's Citron: We're Not A Phone Company


Vonage In Print News

February 9, 2004

By Staff

(Washington, DC) Fresh from a $40 mil. funding round, Edison, NJ-based Voip (voice-over-IP) upstart Vonage is ready to hit the broadband voice big time, with an accelerating quarterly growth rate and plans for a Wi-Fi telephony launch later this year, according to company Chmn./CEO Jeffrey Citron.


Speaking at a Progress and Freedom Foundation lunch here 2/6, Citron stressed that despite its 100K voice customer count, Vonage is not a phone company at all. "VoIP is just a computer program," he said, an definition that helps lay the groundwork for warding off common carrier regulation of IP telephony. "It's just another application."

Although Vonage sells voice service at a cheaper price than the incumbent telcos, a main selling point are the features, such as the ability to tap voice mail messages on the PC or maintain different phone numbers in different area codes. "The features are where the real stories are today," Citron said.

Admittedly a tiny sliver of the telecom pie, Vonage is growing at a healthy clip. The company added 33K net voice customers in Q4 03, a run rate that was 50% higher than the net new adds in Q3 03. In January 2004 alone, Vonage added 15K net lines, and the company projects it will add 50K net lines during Q1 04.

Taking advantage of his Washington audience, Citron laid out the risks of regulating Voip service like common carrier telephony. Speaking six days before the Federal Communications Commission issues its notice of proposed rulemaking on Voip regulation, Citron said existing law is sufficient for taking care of the top policy concerns surrounding VoIP.

Among those concerns are: the ability of Voip providers to offer 911 service, the ability of law enforcement officials to intercept suspected criminal communications and the robustness of the universal service fund. Vonage was the first company to offer a Voip 911 solution, Citron said, and is working to improve that offering. In terms of law enforcement intercepts, Vonage can offer intercept capabilities and has indeed complied with all legitimate information requests it has received from law enforcement to date.

Vonage contributes indirectly to the universal service fund as a consumer of telecom facilities, an economic contribution that works out close to what Vonage would pay if it had to contribute directly, Citron said. Moreover, current law allows Vonage to formally participate in universal service funding without having to carry the baggage of common carrier regulation.

For these reasons, Citron argued, existing law, which classifies Vonage as an information service, doesn't need to change. Imposing new rules on Voip could smother the infant industry. "Premature regulation could kill the nascent Voip industry altogether," he said, with the U.S. losing its technological lead in this area.

Regulation aside, Vonage is in a better position to compete with the incumbent telcos and cable operators than other IP voice contender, including cable and phone companies themselves. "One of the big disadvantages of a cable operator is that they're not national," he said, and the incumbent telcos are moving slowly on the residential IP voice front.

"It's hard to know that a Bell company Voip offering would look like," Citron said, noting that to date no major residential Voip service is available from a big telcos.

Looking ahead, Vonage is planning to expand its presence and multiply its options. The company is getting ready to launch service on Wi-Fi phones later this year and is eyeing a video telephony option.

Vonage has some financial breathing room to pursue its growth strategy: it announced 2/6 the closing of a $40 mil. series C financing round led by 3i and co-led by Meritech Capital Partners, bringing total investment in the company over the past three months to $75 mil. J. Sanford (Sandy) Miller, managing director with 3i, will join Vonage's Board of Directors.



 
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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 www.vonage.com/911 for details.

** Certain call types excluded.

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