Vonage Goes to Work

Those familiar with Vonage and its unlimited $25-per-month VOIP service for consumers might want to know that the service provider is readying an offer for businesses.

Vonage is quietly testing its Business Plus service with a few customers in the U.S. The service could save customers 35 percent over traditional telephone deals, according to the company. This will be Vonage's offering for customers who need more than two voice lines.

The service provider is bundling a set number of lines and minutes for a flat monthly fee. To support multiple VoIP lines, Vonage certified a handful of devices from AudioCodes, Cisco, Epygi Technologies, and Quintum Technologies.

"Through word of mouth [small office/home office] users wanted to bring Vonage into their business," says Mark Lyons, vice president of value-added reseller (VAR) sales at the service provider. To ready a service, Vonage first identified VoIP products that could support two to 100 employees, he says. And then the service provider teamed with VARs.

"We signed up about 100 resellers in eight months," Lyons says. He says the pilot has been going well with 500 Business Plus lines in service.

While Lyons says Vonage will sell its Business Plus service on Vonage's Web site when the offering is officially available in the late third or early fourth quarter, VARs will do most of the selling. Lyons says that's because Vonage does not want to be in the business of selling VoIP equipment.

Tough Competition?

"This is a pretty good market for [Vonage] to go after," says Irwin Lazar, senior analyst at Gartner. "Vonage's biggest challenge in breaking into the business services market will be competing with other telcos."

Lazar says established players such as Verizon and the other incumbent local exchange carriers offer a variety of VoIP services for small and midsize business (SMB) customers. Vonage will face considerable competition, even at the low end of the market, he says.

Some of these VoIP services are becoming more sophisticated, such as Verizon's recently announced Iobi Enterprise service, which brings VoIP-like unified voice and data communications to traditional Centrex customers, he says.

Also, some customer might prefer companies such as Volo Communications and DSL.net, which bundle broadband and VoIP services. Vonage does not offer users broadband connectivity, just the VoIP service that runs over that bandwidth. Lazar says some users will prefer a service provider that's responsible for both.

Despite the crowded market, Lazar says the smaller business user is the ideal market for Vonage to address.

Although Vonage is venturing into business services, the service provider says it is not planning enterprise-level offerings.

"We have no plan right now to go after bigger users," Lyons says. "We are going from residential to SOHO and into SMBs. It's very easy to deploy even the SMB products where not a lot of resources are needed. When you get to larger enterprises, every deal is custom and they need heavy hand-holding. And that's not what we're looking to do."

While Vonage will compete with AT&T and MCI with its Business Plus service, neither provider is aggressively going after the lower end of the SMB market.