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Vonage finds another landline partner

The Net phone specialist is poised to make a deal with WilTel Communications, an Oklahoma-based phone company, a source says. The deal would expand the reach of Vonage's network.

As it faces increasing competition in the market for Internet telephony services, Vonage is offering new features and expanding its reach.

A source said the company is close to announcing a deal with WilTel Communications that would expand Vonage's ability to use the traditional phone network. This, in turn, would let the company's customers dial a greater number of homes and offices.

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Vonage needs to make such deals, because its calls are made over broadband connections using voice over Internet Protocol, or VoIP, technology. VoIP enables less-expensive phone service, because it sends calls over the unregulated Internet and private corporate networks rather than over the traditional phone network, which is heavily regulated and taxed.

Still, providers such as Vonage need some access to landline networks so that their customers can call people who use traditional phone services. To that end, Vonage has agreements with Qwest Communications International and two other local phone companies. The deal with Oklahoma-based WilTel would expand Vonage's coverage.

This news comes just a few days after Vonage announced price reductions. The company on Monday reduced its fee for monthly unlimited North American dialing from $35 to $30. It also comes as the company faces potential regulation as a telephone company in New York and other states.

Additionally, Vonage recently announced the release of Click-2-Call, which lets users dial directly from their Microsoft Outlook contact listing. Vonage also plans, at summer's end, to sell phones that use Wi-Fi connections, according to Michael Tribolet, Vonage executive vice president.

The push illustrates the pressure Vonage feels, now that AT&T and other major U.S. telephone companies have entered the market for Internet phone services.

The cost savings inherent with VoIP can be as high as 30 percent. Moreover, VoIP providers often offer for free features such as voice mail. As competition heats up, providers are struggling to differentiate themselves.

"We're operating under an 'innovate or die' strategy," Tribolet said.