Vonage launches in the UK

Vonage – one of the VOIP pioneers in North America – soft launched its UK service on Tuesday.

I find paid-for voice over IP interesting because its success may ultimately lead to its demise. The business model depends on people wanting to save money on calls to standard landline and mobile phones. However, the more people who sign up to VOIP services, the smaller the demand for savings on calls to standard landlines, as VOIP phone to VOIP phone calls are, obviously, free.

At first, this would be an advantage to VOIP operators who charge a flat monthly fee for standard landline calls. With less of their monthly flat fee income going to pay termination fees for standard landline calls, their margins will increase. However, if the demand for calls to standard landlines isn’t there, people will simply stop buying flat fee services.

Mobile and international calls may offer a few years of income but free VOIP to VOIP is ideal for international calls. I reckon mobiles will hold out a little longer, as the operators won’t allow their lucrative termination fees to disappear. However, the day when mobile operators become little more than wireless bandwidth providers will also be the day when mobile VOIP goes mainstream. WiMAX and other wireless internet technologies are already of concern to the 3G operators.

Unless VOIP operators plan to become your broadband provider, ultimately their success will kill them. It’ll take years, but eventually we’ll be making IP calls as standard, simply paying for bandwidth to our usual bandwidth provider.

Why not just your normal phone, for now?

The new Vonage UK service has a consumer option at £9.99 a month, which includes unlimited UK landline calling (standard geographic numbers only, of course). Also included is an analogue to IP phone adaptor and reasonable call rates to mobiles, international numbers, etc. Oh, and there’s no minimum contract period.

It’s not a particularly compelling offer. I’d be tempted simply because I’d be excited, for a week or two, about making and receiving my calls using VOIP, without a PC. If saving money is your aim, you can do a lot better elsewhere through your normal phone line.

For £10.99 per month, OneTel offers unlimited standard landline calls on your normal phone and for £3.99 a month they offer free standard landline calls in the evening and at weekends – i.e. when most consumer make calls. While OneTel’s £10.99 is more expensive than Vonage, my phone line is a helluva lot more reliable than my broadband connection and also works during a power cut.

Even better, though, TalkTalk is offering their free evening and weekend calling package free for a year, with free calls to other TalkTalk customers for life. The mobile and international rates are good too.

The only reason, that I can think of, to use the Vonage consumer service is if you want to save your phone line rental, or get a cheap second line. If you have ADSL through a BT line, you’re not going to be able to ditch your first line’s rental, though.

I’ll stick to Skype for VOIP, even if I do seem to spend most of time saying, “Can you hear me? Oh, you’re really echoing.”