RESELLER CHANNEL: EarthLink to Resell Vonage VoIP

Posted: 6/2003

EarthLink to Resell Vonage VoIP

By Tara Seals

EarthLink Inc. now is reselling voice over IP service from Vonage DigitalVoice. The EarthLink Unlimited Voice bundle includes unlimited local, regional and long-distance calling for a flat rate of $39.99.

"With EarthLink Unlimited Voice, EarthLink becomes the first major ISP to offer its customers a comprehensive and easy to use voice-over-IP solution," says Erika Jolly, EarthLink's vice president of strategic brand management.

The product is targeted to home-based businesses and parents with children in another city -- users can select a phone number in that city and turn long-distance calls into local ones. With the service's area code selection feature, customers no longer are tied to their local area code and can select from a list of more than 15 area codes in cities across the United States.

The move is the latest by EarthLink to include enhanced services in its portfolio and to focus on high-value broadband revenue to shore up its declining dial-up business. The nation's third-largest ISP already offers fee-based online photo processing through an arrangement with Snapfish, and struck deals last year with online music services FullAudio and MusicMatch to sell MP3 downloads.

As of the first quarter, EarthLink saw the number of its dial-up subscribers decrease 4 percent from its 2001 numbers, to 4.03 million.

As for Vonage, some analysts say this resale agreement is more than broadband news: Deals like this one could herald a new chapter in local phone competition.

"Vonage could become the Napster of the telecom industry," Guzman & Co. telecom analyst Patrick Comack told The New York Post. "If phone service with VoIP gets traction, it's a real problem for the Bells."

Using existing DSL or cable broadband connections, Vonage users (now numbering about 15,000) can make local and long-distance calls over the Internet, bypassing LECs and IXCs. The company recently announced it had completed more than 15 million calls since its launch in March 2002.

"If Vonage can scale and build some consumer awareness, it's a really dangerous company," Comack told the Post.

The EarthLink deal may give the company that visibility. EarthLink has about 780,000 broadband subscribers. Vonage also recently signed a deal allowing Amazon.com to offer its service online, furthering the company's new channel strategy of focusing on retail, e-tail and wholesale partnerships.

"The shift toward major retailers, e-tailers, MSOs and large ISPs enables Vonage to quickly sell our voice services to these businesses without subjecting them to major expenditures or operational impacts," says Michael Centrella, director of Vonage's channel sales.

The service also has ease-of-use in its favor. Customers use standard telephones to for Vonage's residential or business local/long-distance calling plans. For instance, EarthLink Unlimited Voice is a plug-and-play solution that works with either a DSL or cable connection and can be installed with any touch-tone phone. Customers can use a standard router to split their broadband connection between their modem and analog telephone adapter box. The ATA box, which is provided for free in the EarthLink Unlimited Voice startup kit, converts the digital signal to an analog telephone signal. The phone is then plugged into the ATA, delivering dial tone.

Other pricing options, available through Vonage's network of resellers, affiliates and agents, include:

• Residential Premium Unlimited Plan -- $39.99 per month for unlimited nationwide calling

• Residential Basic Plan -- $25.99 per month for 500 minutes of nationwide calling

• Small Business Unlimited Plan -- $69.99 per month for unlimited nationwide calling

• Small Business Basic Plan -- $39.99 per month for 1,500 minutes of nationwide calling.

All Vonage plans include caller ID, call waiting, voicemail, call forwarding, area code selection, call return (*69), caller ID block (*67), repeat dialing and call transfer. Subscribers also can access Web-based account management, including voice mail retrieval and real-time inbound/outbound calling activity logs.

The company also offers reduced international calling rates, including London and Toronto for 5 cents per minute and Sydney for 6 cents per minute.

Those kinds of options could give the Bells a run for their money, says Kaufman Bros. LP analyst Vik Grover. "With VoIP, there is no distinction between local and long distance," he told the Post. "You're going from a metered, per-minute rate service to a flat-rate service."