Vonage
Trials and Tribulations of a VoIP Service Provider
With a subscriber base of 2.4 million, Vonage is the undisputed big boy among the pure play residential VoIP service providers. As a pioneer in the industry, Vonage has brought Internet telephony to the forefront of consumer's minds with an extensive marketing campaign throughout the U.S.
The company however, is not without its problems. In May of 2006, Vonage launched its IPO of 31.25 million shares opening at $17, and closing at $12.85 for an opening day drop of over 12%. At the time of this writing, shares of Vonage (VG) are trading around $3.10.
Despite the disappointing public offering and huge marketing expenses, Vonage reported an increase in revenue of 64% in Q4 '07, cutting its loss to 72 million from $86 million a year ago. The company expects to become profitable in the near future, if it can successfully overcome some very significant hurdles.
In March, a jury found that Vonage had unintentionally infringed on patent rights in a suit brought by Verizon. Vonage was ordered to pay Verizon $58 million, and an ongoing royalty of 5.5% of subscriber revenues, a potentially crushing blow to the company that is now under a fast track appeal process.
Vonage stated in its Q4 report that it has developed workarounds for two of the three patent infringements, the third still under development. The patents infringed upon include VoIP to PSTN connection issues, as well as call waiting and voice mail features. The third infringement that Vonage is still working on involves VoIP over WiFi handsets.
Vonage is also facing stiff competition from the cable companies, as they aggressively pursue the residential market by offering price incentives for triple play broadband services, i.e. voice, video, and data. Comcast Communications is offering its Digital Phone, Cable TV, and Internet Broadband services for $33 each when you subscribe to all three, albeit for a limited time.
While Vonage and most other pure play providers can offer lower prices for VoIP, the prospect of the triple play, all three services from one provider, does have some appeal to the consumer. Comcast is expected to surpass Vonage in residential market share this year.
Still, if Vonage can survive, they are a viable and reliable VoIP service provider that offers some very good deals and features. Let's look at a few.
Calling Plans
offers calling plans for small businesses and residential consumers. Calls are free in the U.S., Canada, and Puerto Rico, and they just recently added free international calls to the U.K., Ireland, Italy, France, and Spain. Other international calls start from 1 cent on up.
The Residential Basic plan offers a generous 500 minutes for $14.99 per month. Incoming calls are free, and any minutes over 500 are 3.9 cents. Standard features such as voice mail with email notification are included, and you can have the message attached as a .wav file that will play on your computer. Free calls to Europe are not included in the basic plan.
The Residential Premium Unlimited plan gives you unlimited minutes for $24.99 per month in the U.S., Canada, Puerto Rico, and to select European countries. Currently Vonage is running a one month free promotion for new subscribers. An additional savings of 20% can be had if you choose to pre-pay $239.99 annually.
Vonages Small Business Basic plan includes 1500 minutes for $39.99 per month, and each additional minute is 3.9 cents. The Small Business Premium Unlimited costs 49.99 and has unlimited calls to the U.S. Canada, Puerto Rico, and select European countries. Both business plans include a fax line at no extra charge.
Standard Features
Vonage offers over twenty standard features at no extra cost. Services such as call waiting, voicemail, call forwarding, and 3 way calling are standard with all calling plans.
E911, the FCC mandated emergency services feature is available in many areas, and the rollout is ongoing, but you must resister your address through your dashboard at the website. Vonage will then route your registered address and phone number to your local emergency services call center.
V-Fax is Vonages free outbound fax service that lets you log into your account, place a call to a fax machine, and fax a file from your computer. Supported file formats include Word, Excel, PDF, Power Point, and many others.
Premium Features and Add Ons
One of the cooler things about the pure play VoIP service providers is that they allow you to have multiple phone numbers in whatever area codes you choose. Virtual phone numbers in one area code allow friends and family to call you toll free no matter where you are. Vonage lets you add a virtual phone number for $4.99 a month.
Vonages SoftPhone is an application that turns your laptop into a mobile communications center. Calls are made through a headset connected to your sound card, or any USB telephone, directly through a broadband Internet connection. Most features are available with the SoftPhone, including E911 with proper registration. A SoftPhone line can be added to your account for 500 minutes at $9.99 per month
Something new at Vonage is Vonage Text, an add on service that transcribes your voice mail into text and emails your messages to you. Now instead of having to listen to all your messages, you can quickly scan them and respond to the ones most important to you. Vonage Text costs 25 cents per message.
As a Vonage customer for almost four years, I have few complaints. At one point I experienced some call degradation in the form of an echo on a number of calls, lasting over a period of about a week. That could of course be the fault of my broadband connection. Generally, call quality has met or exceeded land line service.
Another incident involved an interruption of service. Customer service promptly answered my email explaining that some of their subscribers were experiencing intermittent service, and that their engineers were aggressively working on it. Service was restored later that day.
As far as customer relations go, the company took the unusual step of offering its subscribers a chance to get in on the IPO back in 2006. Along with its aggressive marketing campaign, Vonage also likes to use its subscribers to spread the word, by offering up to 2 months free service for a new subscriber referral.
Vonage may not be the cheapest pure play, but they are priced competitively
and well below the Telco's and Cableco's. If they can survive their
current legal problems, they will most certainly remain a contender in the residential
VoIP market.
