Vonage rings up Canadian VoIP opportunity

Vonage, an American broadband services provider, has partnered with Group Telecom to launch a service in Canada at the same time the CRTC has said it will likely regulate voice over IP the same as other phone services.


N.J.-based Vonage, which was attracted to the Canadian market for its high broadband consumption, is offering flat rates, Canadian billing, local phone numbers, 24-hour customer assistance and free services and hardware.

About 12 out of 100 Canadians have broadband connections, compared to roughly seven out of 100 Americans, according to 2002 data from Forrester Research in Cambridge, Mass.

Demand for Vonage services has come from Canadians “”either from the United States originally — they moved to Canada and want U.S. numbers — or they call the U.S. a lot,”” said Louis Holder, executive vice-president of product development at Vonage.

The company, which has been offering a broadband service to Americans for two years, has approximately 140,000 customers there and anticipates expanding its base to about 300,000 by the end of the year.

Holder said he hopes to see the Canadian market generate 7,000 users at the end of this year. He expected adoption by residential users, small businesses and telecommuters because the Vonage system gives customers the mobility to take their home phone to work or while travelling around the world, provided there’s a high-speed Internet connection. They would have access to the same phone number.

Hooking up with Group Telecom gives Vonage access to a network that offers voice and Internet services rather than forces it to build its own, said Robert Watson, senior vice-president of 360networks subsidiary Group Telecom in Toronto. Watson would not disclose the length of the partnership or other specifics about the deal.

The agreement with Vonage is a good fit for 360networks, which provides data circuits, Internet services and telephone lines and long distance services mainly to large firms, said Watson. He sees the collaboration as a way for Group Telecom to penetrate homes and small businesses.

As for the CRTC’s recent preliminary ruling on voice over IP (VoIP), Holder said Vonage has experienced similar challenges with the Federal Communications Commission in the U.S. He said Vonage wouldn’t be fazed if the CRTC decides voice-over-IP providers should be unregulated or creates certain consumer protection laws around it.

“”For example, (if the CRTC ruled) all voice-over-IP providers must have a 911 solution or all voice-over-IP providers must have a wire-tap solution — those are all in our favour.””

Yet the broadband provider isn’t savvy about the ins and outs of the Canadian market, Holder admitted. It will be forced to deal with French language issues and has been U.S.-centric for a long time.

“”We’ve created our marketing material around a U.S. focus,”” he explained. “”For example, one of our marketing messages is ‘Take down the big phone companies. The revolution.’ That sort of thing, which might not play the same in Canada.””

Indeed, Canadian businesses aren’t simply smaller American businesses and therefore their buying decisions differ, said Roberta Fox, president and senior partner of Fox Group Consulting in Markham, Ont. “”We’re more traditional, more cautious.””

This reluctance has been made worse following the demise of phone companies like Accent that enticed Canadian businesses with their low prices only to force them to quickly find new services, Fox explained. She said she doubts many organizations, having realized reliability and the strength of the brand are important, will switch phone companies strictly for price.

Vonage has to educate the mid-sized market, which hasn’t necessarily had the sophisticated phone features that larger companies have, about its offerings and benefits, said Fox. “”Are they going to do that direct? Are they going to do that through channels? Are they going to do that through dealers?””

The American company’s move into the country will “”push the Canadian carriers to wake up a bit and move a bit faster,”” she says. “”But I think it’s still a bit of a Wild West,”” in that some providers will be surprised when VoIP is harder to sell and install during the first few years of its introduction, she said.

Comment: info@itbusiness.ca

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