Vonage prepares for VoIP battle via alliance

Voice over Internet Protocol provider Vonage announced a partnership Monday with a consortium of independent carriers, as it looks to grow customer numbers before traditional phone and cable providers jump into the VoIP fray.

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Under the deal, Associated Network Partners Inc. (ANPI) will offer its 275 members the ability to sell custom-branded broadband phone service to their customers, which include several hundred thousand high-speed Internet subscribers. Subscribers will be able to get unlimited local and long-distance calling throughout the United States and Canada for a flat rate, just like they would if they purchased a Vonage plan separately.

As bigger players like AT&T and Time Warner Cable start rolling out their own VoIP offerings, analysts say companies like Vonage will form more partnerships.

"It's pretty clear that they need to bulk up their customer roster as quickly as they can before the real competition starts," said Lisa Pierce, a research fellow at Forrester Research. "And partnerships like this are the only way to really do that."

Phil Giordano, vice president of cable/multiservice operators and major accounts for Vonage, said this is just one of many partnerships the company has in place. Vonage has already announced deals with the Internet service provider EarthLink and several second- and third-tier cable companies including Armstrong, CableAmerica and Advanced Cable Communications.

This is the first time Vonage has partnered with independent service providers, which have traditionally served rural, sparsely populated regions where the regional Bell companies have not offered service.

"It would be hard for us to partner with each independent carrier," said Giordano. "They don't represent a good base of customers individually, because they are usually small. But collectively, they are very significant."

Partnerships only account for roughly 5 percent to 6 percent of Vonage's overall revenue right now, but Giordano said he expects them to eventually contribute up to a third of the company's sales.

Other small VoIP providers are also partnering with broadband carriers. Net2Phone has recently begun targeting the cable market. And Ravi Sakaria, president and CEO of VoicePulse, another VoIP competitor, said his company has a partnership strategy as part of its business plan too.

The big question is whether partnerships will be able to keep these smaller players alive once the bigger players like AT&T enter the market.

"I'm not sure if it will keep them alive," said Pierce. "But it might be able to keep wind in their sail. I just can't predict for how long or how strong that wind will blow."