Vonage CEO prepares for changes in VoIP market

Jeffrey Citron , CEO of Vonage Holdings Corp., visited Toronto on Monday to officially open its Canadian office and to shed light on the way its broadband offerings are evolving within the country and throughout the U.S.


34, launched two other firms, Island ECN and Datek, which focused on the online financial services industry in the 1990s. Vonage, which launched a Canadian voice-over-IP phone service last April, joined a handful of other providers taking a crack at this market.

ITBusiness.ca spoke with Citron about his plans for the year ahead.


ITBusiness.ca: The Federal Communications Commission ruled that Web phone systems will be excluded from state regulations. But in Canada, the CRTC’s preliminary ruling was that VoIP is just like a regular phone service. How do you expect the regulatory climate to change in Canada with respect to VoIP?

Jeffrey Citron: The FCC’s ruling was really important, because what it did was create a national framework. So it took the U.S. three years to get where Canada is today, which is kind of odd. Now the CRTC — obviously looking at this — takes a slightly different approach. Right now they haven’t released any findings yet, but they do recognize that, and like we recognize as well, that there are some things that just don’t make sense anymore for voice-over-IP. Things like rate regulation doesn’t make sense. Entry and exit doesn’t make a lot of sense. There are social policy questions that need to be answered, but being answered by demanding them in regulation or by allowing the markets to evolve and provide them is something that still needs to be reviewed. Clearly where the CRTC is probably most stuck right now is sort of how they deal with incumbent operators that want to enter this new technology , particulary because the CRTC is leaning towards allowing this new technology to have a wider regulatory touch than incumbent technologies and incumbent monopolies, monopoly providers. (In Canada,) I think it’s a work in progress. I think in Canada, it’s not so much whether you (regulate the industry) on a national basis . . . (but) how do you protect this industry in one way, let it grow without jeopardizing your incumbent industry? What Vonage believes is that you definitely need to maintain a less restrictive area for voice-over-IP technologies both for incumbents and for new entrants.

ITB: Vonage is planning to release Wi-Fi phones next year, and Canada’s urban areas have been filling up with hotspots. What are the most compelling revenue models you see emerging that will make WiFi profitable for hotspot providers, equipment manufacturers and network operators?

JC: We’ve been following the last-mile wireless access (space) for a long time now. And clearly we believe that now technology has advanced to the point where the true deployment of wireless broadband in North America as a whole is a viable business. The business that makes the most sense will likely be a wireless ISP that allows for mobility — mobility to actually roam a bit. And that’s actually not practical with Wi-Fi today given the very small amount of roaming space that you have, although linking lots of Wi-Fi networks together or hotspots in a way that lets you have mobile broadband access probably is a very interesting business. And one that’s a platform that can drive other services, and that could be very good for Canadian consumers and very good as a standalone entity. We’re very excited to see these wireless ISPs creep up there. We think there’s got to be a little more technology deployment, still, in terms of advancing that wireless technology forward. But it’s coming, and it’s going to come very quickly, when it gets there.

ITB: As competition heats up between various providers, what kind of features do you think you’ll introduce to stay ahead?

JC: I think it’s not just about features but about the user experience. And I can’t stress this enough. It’s not any one thing. It’s a combination of value proposition, which is cost plus capabilities plus experience. So at Vonage, we’ve made a remarkable improvement in the user experience, particularly on the equipment you get to use. Voice-over-IP up until recently, up until maybe just six months ago, we were kind of like the old phone companies: One kind of adaptor, all look the same, all have the same functionality, all have the same cost structure. And then Vonage decided to enhance people’s user experience, particularly in the equipment they get to use, by launching products from four major manufacturers — Cisco, LinkSys, Motorola and Netgear. That is part of the user experience. That is how people are going to start to differentiate themselves. Plus as you have new kinds of transmission capabilities, as wireless or mobility becomes more relevant for broadband, so will the applications that we rely upon. It’s going to be an exciting time of development over the next six to 18 months.

ITB: Do you think Vonage is starting to make the shift from touting price versus features?

JC: We think we will maintain a fixed-base price system. You’ll basically buy everything sort of together as one with very few advanced features, minimal as possible, to keep the buying decisions easy. But, yes, already we’re transitioning our service to one that’s around the user experience. And we’ve made a very conscious effort. I mean, in the last nine months, almost all of our development resources have gone into bringing on a wide range of new pieces of equipment . And we’ll start releasing more equipment in the coming years, because we’ve got that program in place.

ITB: What are you doing to prevent the threat of VoIP-related worms and viruses from prematurely stalling the market’s growth?

JC: People have been talking a lot about this, and it definitely is a problem for some operators. But for Vonage, it shouldn’t be much of an issue. While our VoIP system runs over the Internet and our managed backbones, you should note that our system is generally a closed system. So you need to hack into our system in order to gain access. And that’s a very big difference than, let’s say, spam e-mail. As a matter of fact, if you just spam somebody using Vonage’s voice services, that’s called telemarketing. And obviously we’re just as susceptible to telemarketing using voice-over-IP as you are to using regular phone service. We’re very pleased with the security to date. We’ll continue to enhance it, and we’re verypleased with our ability to make sure people don’t spam our users with voicemail or with telephone calls.

ITB: You’ve recently been experimenting with technology to improve emergency 911 services in the U.S. What’s the next step in this research, and at what point might it be expanded to Canada?

JAC: Our 911 services are being expanded into Canada now as we speak. And we’ll be launching basic 911 services to start, and then taking what we’ve done and . . . start deploying that throughout North America, as operators are capable of taking on this new technology. We’ve completed not only successful tests in the state of Rhode Island for E-911, which is the ability to have the operator to see your call-back information live on their screens, and your address. But that deployment is now a full, live deployment. And now we’re looking towards doing other tests throughout the U.S. and making those deployments occur.

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