Vonage Enters Wireless VoIP Market With Dual-Mode Device

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Vonage Enters Wireless VoIP Market With Dual-Mode Device

Vonage Eyes Wireless Entry With Dual-Mode Device

April 4, 2005

By Mike Dano

Voice over IP carrier Vonage Holdings Corp. plans to release a dual-mode Wi-Fi/GSM device by the end of this year, and is considering selling the corresponding wireless service as a mobile virtual network operator.

The moves show that upstart Vonage is aiming to become a major player not only in the emerging Voip market, but also in the wireless industry. And if the company is successful in entering wireless, its presence would serve to further complicate an already complicated market.

Michael Tribolet, executive vice president for Vonage's operations, said the carrier is definitely interested in dual-mode devices. Such gadgets would give Vonage's customers inexpensive calling options in Wi-Fi areas through Voip as well as complete mobility through wide area wireless networks. Tribolet said the company was still in negotiations for such a device, but that it hoped to release a dual-mode phone by the fourth quarter of this year. Tribolet declined to discuss potential device manufacturers, but said Vonage was talking to several such vendors.

Tribolet hinted at Vonage's potential MVNO offering while discussing the dual-mode device. He said Vonage would only sell a dual-mode device if it could combine both the Wi-Fi and wide area network costs into one bill. When asked if that meant Vonage would offer its own wide area wireless services as an MVNO, Tribolet said, "there's several options, but that's an option."

"Bundling Wi-Fi and wide area wireless is the only way we would look at it," he said, adding that Vonage's goal is to keep its billing services as simple as possible.

"Our goal is to focus on the consumer," Tribolet said. "We're not here to do anything but focus on the consumer."

A Vonage MVNO service, along with a dual-mode device, would highlight several notable aspects of the telecommunications market.

First, devices that combine both wide area and local area wireless networks are just starting to come on the scene. In the United States, Siemens, Hewlett-Packard Co. and others sell a handful of such dual-mode gadgets. Research firm Infonetics Research said industry built 8,000 dual-mode devices last year totaling $6.6 million, and that the number of such devices is set to increase. The devices have caused somewhat of a stir in the industry because users will be able to make Voip calls over Wi-Fi networks-thus cutting into wireless carriers' wide area network revenues. However, it appears carriers such as T-Mobile USA Inc. and Cingular Wireless L.L.C. are consenting to such uses by agreeing to sell dual-mode devices. Further, Vonage has already put its toe in the waters of mobility with plans to sell the F1000 Wi-Fi handset from UTStarcom starting this summer. The handset will work like a cordless phone in home Wi-Fi environments, but can also connect in public hotspots.

Second, a Vonage MVNO offering would emphasize the increasingly complex nature of the wireless market. If Vonage's service were to use Cingular Wireless' network, for example, Vonage would essentially be competing against Cingular's parent SBC Communications Inc. using the company's own wireless network. SBC, as well as the rest of the broadband telecommunications industry, is working to catch up to market leader Vonage with its own Voip offerings. Thus, MVNO relationships not only create competitive concerns for wireless carriers, but could also complicate the businesses of parent companies like Verizon Communications Inc. and SBC.

Finally, an MVNO offering from Vonage could mark another step in the evolution of wireless to IP. Indeed, some forecast a time when all wireless calls will be transmitted through a Voip connection. Tribolet said Vonage's service is both device and network agnostic, meaning that it could theoretically travel over high-speed wireless networks like WiMAX and W-CDMA/HSDPA. Last year, a Vonage executive demonstrated the company's service working over Verizon Wireless' CDMA EV-DO network in Washington, D.C. Currently, Vonage's minimum service requirements are 100 kilobytes per second on both the uplink and downlink. Verizon's EV-DO network-today the fastest wireless network in the United States-supports average downlink speeds of 300-500 kbps and uplink speeds of 60-80 kbps.

Vonage's executives recently attended the CTIA trade show in New Orleans. The event featured most of the major players in the wireless industry, from carriers to handset vendors to infrastructure providers.

"We want to look at what's available," Tribolet said. "Today there's obviously a lot more opportunities" in the growing wireless industry.

Vonage isn't the only Voip company working in the wireless industry. Skype recently announced a teaming with Motorola Inc. to have its software installed in various Motorola Wi-Fi products, including dual-mode handsets.

Vonage Facts:

Founded in January 2001.

Based in Edison, N.J.

Privately held, with four rounds of venture funding totaling $208 million.

More than 1,000 employees.

More than 200 million calls completed.

More than 10 million calls completed per week.

550,000 active lines.

Cost: $15 for 500 minutes to anywhere in the United States or Canada and $24 for unlimited calling in the United States or Canada.