Vonage announces two services

Vonage has introduced two new services that improve the value of its core VoIP offering. Vonage World provides unlimited calling around the world to more than 60 countries, including India, Mexico and China, for the flat monthly rate of $24.99. Vonage Visual Voicemail service provides unlimited "readable voice mail" delivered via e-mail or SMS text message. Both services have become basic features of the core Vonage offering.

By expanding its domestic unlimited calling plan to now include 60 countries, Vonage has the least expensive service available for many international callers, excepting PC-to-PC calls and the occasional international caller using a cents-per-minute plan. At $24.95 a month for unlimited local, domestic and international long distance, the Vonage plan already beats AT&T, Verizon, Qwest and the cable companies by $9 to $20 a month for an unlimited domestic plan. By adding international calls to an already low rate, Vonage ups the ante for competitors to beat it on price and calling areas.

The Vonage Visual Voicemail feature lets subscribers read a speech-to-text version of their Vonage voice mail on a PC or mobile phone. It had previously been a chargeable item but it is also now offered free -- in direct competition with the same free feature on Google Voice; neither telco nor cable wireline voice services offer such a feature.

Our observation: Vonage needs an effective attention-getter if it is to gain more customers, and the free international calls may be just the ticket to gain market share without breaking the bank on subscriber acquisition costs. Verizon and AT&T had pulled the plug on VoiceWing and CallVantage, leaving Vonage an opportunity to gain these customers; however, Vonage lost nearly 100,000 net customers in H1 2009, leaving it with about 2.5 million lines in service. If it cannot win alone with less expensive domestic long distance even as pure-play VoIP competitors exit the market, perhaps it can gain market share by expanding its free calling circle.

Steve Taylor is president of Distributed Networking Associates and publisher/editor-in-chief of Webtorials. Larry Hettick is a principal analyst at Current Analysis.