Vonage seeks a million users by '06

Vonage wants to outfox cable in 2005 with a million subscribers by year's end. Where's AT&T?

Ben Charny Staff Writer, CNET News.com
Ben Charny
covers Net telephony and the cellular industry.
Ben Charny
2 min read
SAN JOSE, Calif.--After unveiling its CallVantage Internet phone service here about this time last year, AT&T vowed to have a million customers within a couple of years.

Now it's a different Internet phone operator--Vonage--singing the same million subscriber song, as about 6,000 gather for the Spring VON 2005 Internet phone conference here.

Vonage appears to have a better chance than AT&T of becoming the first commercial Internet-based telephone service provider with a seven-figure subscriber count.

The million mark would be a first for any commercial provider of exclusively voice over Internet Protocol services. VoIP is software that lets an Internet connection serve as a telephone line. VoIP calls are free if exclusively on the Internet, as in PC to PC or, increasingly, from cell phone to cell phone. It's typically $20 to $30 a month for unlimited North American calls to cell and landline phones.

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Commercial VoIP providers are about $20 cheaper a month than traditional local phone operators--collectively known as the Baby Bells--largely because VoIP calls are unregulated.

VoIP operators with millions of paying subscribers--cable operators Time Warner Cable and Cablevision are on pace to reach the same plateau--are more ammunition for those in favor of regulating VoIP, which would take away a key advantage it has over traditional telephony.

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State utility regulators and other VoIP regulation proponents say that as more calls flow onto the unregulated Internet, there will be less tax revenue from the traditional phone network--tax revenue that funds public phone projects and emergency services.

Vonage CEO Jeffrey Citron said Monday at the VON conference that Vonage will have a million subscribers by year's end if it continues adding an industry-leading 15,000 new customers a week. The weekly pace is the fastest in the United States, even outdrawing--to Citron's delight--VoIP sales by cable operators.

The cable providers sell VoIP as part of a triple play of voice, video and broadband priced at a steep discount for the full package.

"Do the math, and it's easy to see where we'll be by year's end," Citron said.

AT&T's CallVantange Net phone service has about 75,000 subscribers, according to a source. AT&T spokesman Gary Morgenstern said he had no comment Monday whether the goal of a million subscribers by 2006 is still in place. The company has never reported its CallVantage subscriber numbers.

To AT&T's credit, it has been through a lot in the last 12 months. First, government utility regulators eliminated key fair-competition rules that guaranteed inexpensive access to the Bell operators' mammoth local phone networks. That played a large role in AT&T's subsequent retreat from the local phone market and in local phone giant SBC's pending purchase of AT&T for $16 billion.

"Things have changed so much," AT&T spokesman Gary Morgenstern said.