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Last Updated: Friday, 20 May, 2005, 12:52 GMT 13:52 UK
Broadband telephony gets a boost
Jane Wakefield
BBC News technology reporter

Vonage's broadband router
Vonage is to sell its kits in branches of Staples
Broadband telephony firm Vonage is stepping up its efforts to provide an alternative to BT in the UK

The US company is to sell its kit, which allows people to make web calls on their existing home phone, in branches of Staples.

The kit consists of a broadband router which is plugged into a broadband connection and home phone.

Vonage is hoping the fact it works via a phone rather than a computer will make it appeal to a wider audience.

Customers pay a 9.99 monthly fee which will entitle them to unlimited local and national calls. Vonage-to-Vonage calls are free and there are cheap rates for mobile and international calls.

Consumer confusion

Web-phoning technology, known as voice-over IP (voIP) , converts phone conversations into packets of data to be transmitted down the same wires used to browse the net.

It is becoming more popular and getting a higher profile as internet service providers and firms such as Skype attract customers to this lucrative new area for broadband users.

Woman on the telephone
The way we make telephone calls is due to change

According to the International Data Group, up to 11% of UK broadband users will have a voIP service by 2007.

"Voice-over IP is set to change the telephone landscape in the UK, accelerate price drops in fixed line telephony. It will increase customer choice but it will also add to customer confusion," said Ian Fogg, an analyst with research firm Jupiter.

Part of the confusion lies in the fact that voIP services are part broadband, part telephony.

It will be a "big challenge" for Vonage to overcome this paradox, said Mr Fogg.

Dial code snobbery

Vonage, which already has 650,000 customers in the US and Canada and is adding 15,000 lines a week, remains determined to go head-to-head with BT.

"We see it as a fixed line replacement rather than being PC-based," said Kerry Ritz, managing director of Vonage UK.

"Using a phone, being able to wander around the house, that is how people like making calls," he added.

For its part, BT is spending millions on its so-called 21st century network which will transform the traditional telephone network into an one based on IP (Internet Protocol).


For Nakita DiGuardi, marketing manager of router manufacturer Belkin, the challenge to convert hearts and minds rests in turning voIP services into a retail proposition.

"Seeing the kit on shelves, and hearsay from friends, will give it a new push as people see that it is not only about making savings on calls," she said.

Some of the other features that come bundled with voIP services include the ability to have e-mails read out over the phone, the immediate transfer of a call to a mobile phone and the ability to divert all calls to a different number when travelling or on holiday.

With the Vonage service, people can choose a number from one of more than 120 UK dialling codes which they can keep for life, even if they move house.

The dial code does not have to tally with where they live, meaning someone living in Manchester could have a London number if they wanted.

Naked DSL

AOL and Wanadoo are due to launch voIP services soon
A Voip phone adapter will cost around 30
Wireless routers, which allow home networking as well, cost around 59.99
11% of UK broadband customers could have voIP services by 2007

It could create a new type of dial code snobbery, where people living in an area they regard as less upmarket opting for a number from a posher part of town, said Mr Ritz.

For an added rental fee of 2.99 people can also have extra numbers from different geographical areas or even different countries, a big advantage for businesses in particular.

"For a small business based in the north of England it can be a serious issue not to have a London base," said Mr Ritz.

"With this service they can at least create the perception that they have a London base," he said.

Similarly people living in England with relatives abroad can have an international number which will mean their relatives can call them at a local rate.

And if the long-distance relative gets their own Vonage service, all the calls will be free.

"Services like this could dramatically shake-up the business model of international calling," said Mr Fogg.

One of the main issues for net telephony providers lies in the fact that customers will need to have a broadband connection, which in turns means many will also be paying a monthly rental to BT for that line.

One solution going by the somewhat exciting name of "naked DSL", could change this.

"Naked DSL is a buzzword in the industry at the moment. Basically it would mean that people could pay for their broadband subscription without having also to pay for line rental," explained Mr Fogg.

According to Vonage, regulator Ofcom is considering the issues and it is hopeful changes can be introduced in the next 18 months.

The free phone call revolution
19 May 05 |  Business
Skype in deal with Hutchison unit
07 Feb 05 |  Business
BT offers free net phone calls
10 Nov 04 |  Technology
Watchdog backs broadband changes
06 Jul 04 |  Technology

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