Vonage Appears on Verge of Wireless VoIP

Vonage, one of the early leaders among independent providers of voice over Internet Protocol (VoIP) service, is reportedly working out the final bugs in a WiFi-compatible service that could launch at any time.

A Vonage spokesman did not return calls seeking comment, but several published reports say Vonage has begun asking customers to test-drive both wireless handsets for VoIP and wireless routers from Cisco's (Nasdaq: CSCO) Linksys.

Some analysts believe WiFi and VoIP make a perfect match, since both are rapidly emerging technologies that have caught on with consumers. Also, WiFi could bring enormous portability to the VoIP niche, extending its inexpensive calling not only to any part of a home- or office-based network, but also to public WiFi, or Internet access points, where the technology could become a challenge to mobile phone use.

Matter of Time

WiFi Networking News Editor Nancy Gohring said that Vonage at one time tested a WiFi service with Boingo, which operates WiFi hotspots around the country. That type of service has additional technological hurdles, however, since it would require a method of authenticating a user and confirming their subscription to the VoIP service, she noted.

Vonage might be testing hardware and software solutions to that and other hurdles for WiFi VoIP, including voice quality and the complexity of setting up systems to work properly.

The firm is far from alone in targeting the market for mobile calling over the Web. Skype, a VoIP competitor, has acknowledged that it is working on a wireless handset, and other firms have brought similar products to market. Most have been high-priced, however, preventing them from having a major impact on the market.

Such services will be the key to fueling continued customer adoption of VoIP, IDC analyst William Stofega said. He said that being a low-cost alternative to traditional voice services will only take the VoIP industry so far.

"Carriers will need to offer services that are as compelling as they are affordable," he added.

Given its history and the niche it has carved for itself, Vonage is likely to roll out the product only when it knows it can do it at a cost that consumers will find reasonable. At the same time, there are signs the firm is poised to make some major moves in the VoIP market, even as giant firms such as incumbent telecoms and cable companies start to elbow their way in.

And They're Off

Earlier this month, Vonage announced it had secured some US$200 million in venture funding, a windfall so large that one analyst compared it to an initial public offering without the attendant hype or hassle.

Whether it's at home or at WiFi hotspots, the arrival of wireless VoIP would have enormous competitive implications, independent telecom analyst Jeff Kagan told the E-Commerce Times.

Home users accustomed to wireless phones would no longer be tethered to their computers, while on the road, WiFi and VoIP could provide a boost to one another, with the broadband calling function becoming a killer app for WiFi, which has struggled for economic traction.

"The big carriers are getting into VoIP, but the early arrivers have done well for themselves in gaining customers for what was a largely untested and unique technology," Kagan said. "If they can extend the value of that, by bringing low-cost calls to new arenas, that could continue."

The scramble by companies -- from AOL to Comcast (Nasdaq: CMCSK) -- to get into VoIP or expand their offerings is proof that consumer demand will grow moving forward, he added. Indeed, the $200 million backing for Vonage, which included an investment from private equity firm Bain Capital, only underscores that fact.