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Vonage In The News
Vonage Holdings Corp. Reports Fourth Quarter and Full Year 2013 Results

Carolyn Katz Elected to Board of Directors of Vonage Holdings Corp.

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Vonage, a VT2142 and a RTP300, My Experiences - A Detailed Review
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Internet Phone Service Destined To Grow


Vonage In Print News

Internet Phone Service Destined To Grow
Recent Rulings Favor The New Technology


June 22, 2004

By Leslie Brooks Suzukamo

With no federal rules forcing them to share their networks with upstart phone companies, what's to stop the Baby Bells from squeezing out competitors and raising your phone bill again?

In a word, it may be VoIP.

Voip — which stands for Voice over Internet Protocol — is an acronym from the computer geek's vocabulary that consumers will be hearing more often from their telephone and cable providers over the next few years.

It's a way of making phone calls over the Internet by breaking up the normally continuous voice signal into little packets of data, just like e-mail, Web pages or MP3 music files.

For the moment, less than 1 percent of the nation's estimated 112 million households are using what's called Internet telephony. But the technology research and consulting firm Yankee Group in Cambridge, Mass., estimates that by 2008, as many as 15 percent of households or 16.8 million people will have Voip enabled phones.

"We're inevitably moving toward IP," Yankee senior analyst Kate Griffin said, referring to Internet Protocol. Recent national legal decisions could accelerate that movement, she added.

The federal government two weeks ago decided not to ask the U.S. Supreme Court to overturn a circuit court decision throwing out the 8-year-old federal rules governing how the nation's Bells must share their networks with other phone companies to foster competition. Those competitors, which include AT&T and MCI, depended upon those rules since 1996 to force the Bells to rent their lines wholesale at discount rates.

Since the ruling, the Bells have promised not to raise wholesale rates this year, but analysts expect those rates may start to creep up next year, which could lead to consumer and business price hikes.

The rise of Internet phone calling, however, is beginning to change the telecommunications landscape.

Voip does not require local telephone network equipment to initiate a call, bypassing the need for Internet telephony competitors to lease expensive equipment from the phone companies to run their businesses.

Furthermore, Voip is cheaper to run than the regular phone system and it's unregulated. It's so cheap that Vonage, a technology startup from Edison, N.J., and leader in consumer Voip service with 175,000 subscribers nationwide, offers its service for 10 percent to 15 percent less than regular phone companies, spokeswoman Brooke Schulz said.

Vonage's lowest-priced phone service offers local and long-distance calling in the U.S. and Canada of up to 500 minutes a month for $15 a month, comparable to most plain vanilla local phone service alone. Unlimited local and long distance calls on Vonage cost $30 a month.

Analyst Griffin said the prospect of losing cheap wholesale phone lines will spur competitors like AT&T to embrace Internet Protocol.

"They have more control over their risk, they have more control over their costs," she said.

Indeed, AT&T has launched its own Voip service, AT&T CallVantage, and after little more than two months it has expanded to 46 major cities in 12 states, though not in Minnesota.

AT&T spokesman Gary Morgenstern is cautious about calling Internet telephony a substitute for access to the regular phone networks, however. Internet telephony requires a high-speed Internet connection, and only between one-fifth to one-quarter of American households uses broadband at the moment, he said.

"We do think IP is the future, but I think adoption is a good 10 to 15 years away for the majority of folks," he said.

Yet high-speed Internet access mushroomed by 42 percent last year, with the Federal Communications Commission reporting a total of 28.3 million broadband lines across the country.

Not that the Bells ignoring VoIP. The nation's largest Bell, Verizon, is promising Voip services, and Qwest has a limited Voip service in Minnesota, with the promise to roll it out to its other 13 states this year.

Qwest spokeswoman Cyndy Barrington said that Internet telephony's future is hazy, so Qwest also reached a wholesale agreement recently with MCI to keep it as a wholesale customer on its network.

Time-Warner Cable, which serves Minneapolis, is promising Internet phone service soon, though it has made no specific announcements on locations. Comcast, which is the cable provider for St. Paul and much of the East Metro area, is testing Voip services in Philadelphia, Indianapolis and Springfield, Mass., this year and could roll out services nationwide next year, but it will start in areas where it does not already offer phone service, said David Diers, Comcast vice president of advanced services.

That would seem to eliminate quick deployment in St. Paul and the East Metro, where Comcast already offers telephone service using conventional technology.



 
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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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