Second Calling from Vonage
The Internet telephone company wants to go from your home to your cell phone.
In 2002 Internet telephone company Vonage pioneered service that routed phone calls over the Web, cutting frequent callers’ long-distance phone bills by as much as half. Today Internet-based calling–also known as Voice over IP, or VoIP–is a crowded $43 billion market worldwide, and Vonage is plotting its next moves. One radical idea under consideration is to make a profit.
The company bled customers in recent years as it battled five large lawsuits, including patent claims from competitors, a 32-state investigation into its business practices and shareholder class actions related to its 2006 initial offering. In May 2008, faced with $253 million of maturing debt, Vonage admitted that bankruptcy was a possibility.
In late December Vonage began offering an application called Vonage World Mobile that allows users to make unlimited international calls on their mobile phones. That’s also $25 a month, or $15 for customers who also subscribe to the home Vonage World service.
Vonage says telephone companies charge two to six times as much for international calls as it does. Lefar estimates the international market is worth $12 billion in the U.S.; now his company has just a tiny fraction of it.
Instead of tying customers to their home phones, as Vonage used to, these new services will be offered as applications that can be downloaded to a variety of devices, from netbooks to smart phones. Vonage is also working to enable video calling, as competitor Skype currently does, and is considering partnering with social networking, dating and videogaming sites to provide calling services for members.
One trend in Vonage’s favor: More people are giving up their landlines and going wireless. “If VoIP growth is going to come from anywhere, it will be from mobile,” says IDC analyst Irene Berlinsky. Skype is currently the largest international Internet-calling provider; its calling traffic grew 70% to 85.8 billion minutes in the first nine months of 2009. Google has a free call-routing service, Google Voice, and it recently acquired a small Internet calling firm, Gizmo5.
