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Bon Vonage, Baby BellsA new Internet service means you don't need the phone company anymore.

By Peter Rojas
Posted Tuesday, Dec. 17, 2002, at 11:15 AM ET

A new service called Vonage makes using your telephone over the Internet as easy as picking up the phone and dialing. You simply plug the same phone you have now into a little adapter box that connects to your DSL or cable modem (OK, through a router and then to your modem), and you get a dial tone. That's it. There are no special phones to use, no talking through a PC using a microphone, no weird lag time or decrease in call quality. Technically, you don't even need a computer to use Vonage—all you need is a broadband connection. And you can even keep your phone number. All of which adds up to something important: Vonage is the first Internet telephone service that could credibly replace your regular phone line. It turns your telephone into just another Internet application, like e-mail or instant messenger.

For $40 a month, Vonage gives you unlimited local and long-distance calls, along with free voice mail, caller ID, call forwarding, and call waiting. A cheaper version of the service costs $25.99 a month and includes just 500 minutes of long distance. (It's 3.9 cents a minute after the 500 minutes are used up.) With the average American household paying about $36 just for local phone service, Vonage looks like a pretty good deal. Of course, you have to make all your calls over the Internet, something that doesn't yet appeal to most people, assuming they're even aware that such a thing is possible. But that's partly because every previous Internet telephone service, from Net2Phone to Dialpad to PhoneFree, has had some catch: You couldn't receive calls, or you had to use a special kind of phone, or you could call only other people who were online at the same time.

But with Vonage, Internet users with a high-speed connection (28 percent of the country and growing) really don't need their local phone company anymore. Granted, people have been discovering this for some time. Last year, the total number of land lines in the United States declined 4.9 percent. A small but growing number of households—3 million, according to the Federal Communications Commission—have opted to go with just cellular phones, and there are four new cellular subscribers for every new land line installed.

But cell phones are not as cost effective as Vonage for people who need to make a lot of phone calls during the day. If you need to make, say, a half-hour of long-distance calls each weekday, doing that on a cell phone can be expensive. Plus, the quality of cell-phone connections is still pretty low. Vonage calls, however, sound just like calls made over a land line.

But like a cell phone, Vonage is portable: The service routes all your calls to an IP address in the adapter rather than to a physical phone jack, so you can make (and receive) an unlimited number of calls anywhere you can find an Ethernet port, as long as you take your Vonage adaptor and a telephone with you. If you move, there's no need to change your number. Even if you move overseas, you can keep your U.S. phone number. And if that's not enough to convince you, how about this: Because Vonage is classified by the FCC as a data service rather than a phone service, there is only one annoying tax or surcharge to pay, a 3 percent federal excise tax.

There are other reasons why people would prefer Vonage to a cellular phone. For instance, TiVo users can use Vonage to allow their TiVo to make its daily call. In addition, all calls to other Vonage customers are free, so if you have family in, say, Germany, you can give them a Vonage adapter (as long as they have the required high-speed Internet connection), and you can talk to them to your heart's content without paying an extra nickel. And if you'd rather not talk to them quite that much, Vonage's international rates are competitive: 5 cents a minute to the U.K. and Canada, 7 cents a minute to Japan, 34 cents a minute to India, to cite only a few examples.

Right now, Vonage has about 6,000 customers, but the company hopes that number will grow to 100,000 by the end of 2003. In fact, Forrester Research estimates that by 2006 more than 4 million homes will have abandoned their local phone companies for services like Vonage—more than the 3 million who are expected to abandon the Baby Bells for cell phones by that date.

Consequently, expect the phone companies to use some of their lobbying muscle in Washington to push for some sort of regulation and taxation of Voice Over Internet Protocol services like Vonage. Let's hope they don't succeed. Vonage means that you can finally call up Verizon or Pacific Bell or Ameritech and tell them you don't need them or their poor customer service, inflated prices, and bloated bureaucracies. So, pick up the phone.

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Peter Rojas, a technology writer living in New York, is the editor of Engadget.
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