Broadband telephony taking off

Unlimited calling services from Vonage are hard to resist

It used to be making a voice-over-IP call from your home was the domain of technical hobbyists and starving students. Companies such as Net2Phone and Dialpads made names for themselves in the dot-com bubble by offering low-cost PC-to-phone calls for anyone willing to sit at a PC and talk into a mic.

Things have come along way. While PC-to-phone services remain popular, many consumers are discovering device-to-phone services, such as Vonage, which ride your broadband connection. Service is easy to install; you simply add an analog-to-digital voice converter to your home network. The modem-sized box, called an ATA, includes a LAN port to connect to your broadband router and two phone jacks to connect existing telephones.

But is it worth switching your tried-and-true plain old telephone service to consumer IP voice — even in light of $50 all-you-can-eat local and long-distance offerings?

In a word, yes. In-Stat/MDR’s research shows that broadband telephony services cost on average 50% less than a typical unlimited calling package. For instance, Vonage’s typical plan runs between $26 and $40, compared with Verizon’s $55 unlimited local and long-distance plan — and that’s just for the core service.  By the time you add in the taxes and special charges Ma Bell throws in, you could end up paying double. I pay nearly $100 per month to Verizon for my home office phone service, and I’m tempted to make the switch.

With the ability to get significant cost savings, have consumers actually subscribed to these types of services? The numbers tell us they have. While the numbers are still relatively small, we expect the number of device-to-phone subscribers in the U.S. will grow this year by 256%, to 135,000.  Phone to phone (from the likes of cable IP telephony companies such as Comcast and Cox) and PC-to-phone consumer IP telephony customers still outnumber device-to-phone subscribers by nearly 10-to-1 today. By the end of 2007 we expect the device-to-phone market to outnumber the others by 3-to-1.

What does this mean for the home network owner? Because device-to-phone services are based around a broadband modem and a router, you can take advantage of the cost savings today.  And over time, expect your broadband gateway to incorporate IP telephony capability, eliminating the need to use an analog-to-digital adapter. Today, Yahoo Broadband in Japan offers its broadband voice service using an integrated gateway called the Trio. As of mid-2003, the company had more than 2 million customers.