RESELLER CHANNEL: EarthLink to Resell Vonage VoIP

By Tara Seals

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:

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."