Vonage Has First Mover Advantage, But It's Not Your Father's Phone Company
Telecom Web
5/25/04
In the bleak telecommunications sector, broadband telephony start-up Vonage has emerged as one of the most well known, yet controversial companies. Vonage, a provider of Session Initiation Protocol (SIP)-based broadband Voice over Internet Protocol (VoIP) services, launched its all-you-can-eat consumer voice service in 2002. Providing a best-effort service with local, long distance, and enhanced calling features for a single price, Vonage's service has appealed to the price sensitive user. In a year, Vonage signed up 100,000 users, creating a level of angst among broadband providers, and renewing interest in broadband VoIP among the investment community.
"Vonage has successfully marketed itself and its concept. The company has created a grand illusion in the marketplace," says Lindsay Schroth, broadband access technologies senior analyst at Boston-based Yankee Group. "Most service providers are not only familiar with this small, privately held company, but feel threatened by the start-up and its approach to offering telephony services."
Even so, Yankee Group is predicting that Vonage will become "a victim of its own success." The company’s eventual downfall will come because it threatens the Regional Bell Operating Companies (RBOCs), interexchange carriers (IXCs) , and multiple system operators (MSOs, Yankee Group contends.
"As the incumbent service providers and MSOs offer wide- scale residential VoIP services with quality of service at the same price point as Vonage, we believe the start-up will find it difficult to compete," Schroth said. "Today, some RBOCs require their customers to subscribe to their telephony services to receive broadband. Tactics such as this, as well as the increased focus on the triple play and bundling discounts, will aggravate Vonage's problems." |
