A standard lament in the communications industry is that American consumers
have been slow to adopt broadband internet connections. DSL and cable modems
have been around for years now, but the vast majority of internet users continue
to stick with dialup accounts rather than upgrading.
The reason that people don’t upgrade is that they consider a high-bandwidth
connection to be a luxury, not a necessity. Faster web browsing is nice, as
is the ability to download pictures, MP3s and applications in minutes rather
than hours. But it’s not a reason to spend an extra $25 a month or so –
$300 a year.
In most of these cases, the reason why they’re on the internet at all is email.
Even web access is, for most people, a luxury: the reason that they’re coughing
up $20 a month to be online is that email is a necessity. And email, of all
internet applications, is the one least improved by upgrading to broadband.
Now, however, Vonage has arrived. Broadband
providers should be ecstatic, dialup providers worried, and traditional telecommunications
companies terrified. Finally, there’s a reason for just about anyone to upgrade
Vonage is basically a way of plugging your phone into your cable modem or DSL
connection rather than into a phone jack. Peter Rojas, in Slate, has the goods:
For $40 a month, Vonage gives you unlimited local and long-distance calls,
along with free voice mail, caller ID, call forwarding, and call waiting.
A cheaper version of the service costs $25.99 a month and includes just 500
minutes of long distance. (It’s 3.9 cents a minute after the 500 minutes are
used up.) With the average American household paying about $36 just for local
phone service, Vonage looks like a pretty good deal.
In comparison, I’m paying Verizon $50 a month, plus $16 in taxes, just for the local
component of Vonage’s service. (Tax on Vonage is only 3%, or $1.20 a month on
the premium package, since it’s classed as a data service.)
The great thing about this service is that you don’t need to plug anything
into your computer. In fact, you don’t even need a computer! The router plugs
straight into your broadband connection, and your standard home phone plugs
straight in to the router. (You then need to plug all the other phones in your
home into the same router: this might involve a trip to Radio Shack and a little
bit of time, depending on the size of your house. If you’re in a New York apartment,
it’s not an issue.)
What Vonage has done is make local phone service more or less obsolete. Vonage
makes no distinction between local and long-distance calls, and offers competitive
rates on international calls as well. The baby bells – the companies which
provide the copper wires into your home – used to have a complete monopoly
on local calls. Then other companies were allowed to offer local phone service
too, but still using the baby bells’ copper wire, and still paying them for
that service. Mobile phones offered the first opportunity to lose local phone
service completely, but you couldn’t dial up to the internet on them, and international
calling rates remain appallingly overpriced. Also, you had to change your phone
With Vonage, I can keep my phone number. I can even travel with it: if I hook
up my computer to a hotel’s dataport, plug in the Vonage router, and plug the
hotel phone into that, it’s automatically become my home phone, wherever I am
in the world. I could be in Moscow or Buenos Aires, and I would receive phone
calls for free, and make calls to the US for free, all from my home phone number.
Just think – no more overpriced hotel international phone calls! And at
10 cents a minute to Argentina, even local calls in Buenos Aires might be better
placed through Vonage.
I’ve already persuaded my friend Stefan, in Stockholm, to sign up for the service.
Even when it doesn’t cost very much, people often think twice about calling
internationally when it’s not necessary. Now, if anybody wants to call Stefan,
they can just dial a New York number, and it will go straight through to him.
This is a godsend for ex-pats, even though for some reason Vonage will only
post the necessary router to a US address.
I think that Vonage is going to revolutionise telecommunications. It’s got
good pedigree: Jeffrey Citron, the chairman and CEO, also founded Datek Online
Holdings, the fourth largest US online brokerage, and Island ECN, the second
largest global financial exchange. Pretty soon, competitors will spring up,
and prices will come down further, to the point where Vonage plus a broadband
connection will cost less than the combination of your monthly ISP charges and
your monthly phone bill. At that point, it will actually be cheaper
to have broadband than to have dialup.
My only worry is that the FCC, which is the
creature of the baby bells, will cave
in to them again, and somehow come up with regulations and taxes which put
Vonage out of business. I hope it doesn’t, though. There’s a lot of excess bandwidth
in the US, the product of wildly overoptimistic investment by telecommunications
companies who thought the internet was growing much faster than it actually
was. Vonage could be the perfect application to eat up that bandwidth and get
the telecoms industry going again. Except for the much-hated local phone companies,