Vonage is expanding its horizons beyond delivering VoIP over broadband Internet, and hoping to expand its customer base and revenue at the same time. The new app from Vonage allows Blackberry and iPhone users to place cheaper international calls from their mobile phones. It also highlights the shifting competitive landscape between previously separate technologies.
The Vonage app lets users place international calls at rates that are cheaper even than the rates Vonage charges for the same calls on its broadband VoIP service. Using Vonage will let users save a significant amount of money–as much as 50 percent for some countries–over the rates they are used to paying.
Vonage has faced tougher competition and a slipping audience in the broadband VoIP arena. Other providers like Comcast and AT&T are able to offer bundled pricing and single-bill packages for TV, Internet, and phone service and they have been successful at cutting into the Vonage subscriber base. Vonage recently lost nearly 90,000 subscribers in the same quarter that Comcast saw a 24% increase in subscribers to its phone service.
Vonage isn't throwing in the towel though, and apparently it sees the audience for international calling as an untapped market it can capitalize on. Vonage recently added free international long distance to over 60 countries as a part of its flat-rate broadband VoIP service, and now it is providing a means for placing cheaper international calls with Blackberry and iPhone mobile phones.
The Vonage app will use the Wi-Fi connectivity of the iPhone or Blackberry to route VoIP calls to their destination–avoiding using up the precious minutes users have on their calling plans. In areas where there is no wireless network signal available, the Vonage app connects to Vonage over the cellular network instead. Those calls will tick away minutes from the calling plan, but the international portion of the call is executed between Vonage and the destination so no international long-distance charges are racked up with the mobile service provider.
The fact that the Vonage app made it through the Apple App Store approval process does raise the question “what about Google Voice?” The features and functionality are very similar between the Vonage and Google Voice apps and both encroach on the services being delivered by the mobile service provider such as AT&T. The approval of the Vonage app seems to suggest some deeper animosity or rivalry behind the Google Voice app rejection (or indefinite delay since Apple keeps insisting the app isn't officially 'rejected').
The Vonage strategy capitalizes on the fact that the United States is a melting pot comprised of immigrants from around the world. The people that make up that melting pot still have family and friends in their native lands and providing cheap international calling sets Vonage apart and makes it uniquely appealing for many users.
From the mobile service provider perspective, the Vonage app is just another example illustrating that the mobile phone is no longer a 'phone'. It is a mobile device, or a mobile computing platform. Attempts to deny access or restrict the usage of the devices will cause a backlash among users and ultimately fail. Mobile service providers need to understand that paradigm shift and adjust their business models and service plans accordingly.