Vonage Inks Earthlink to Wi-Fi Deal

By Ed Sutherland

January 09, 2007

Vonage seeks way out of 'VoIP 101' run, analyst said.

Internet phone company Vonage  inked a three-year agreement with EarthLink , allowing the Internet access provider to offer Wi-Fi access to customers served by municipal wireless networks.

Vonage said later this year it will provide customers in EarthLink areas wireless modems as an alternative to DSL or cable Internet.

Vonage also said its Wi-Fi phone will eventually use the networks, providing subscribers the option to place voice calls over Wi-Fi.

Pricing and other details were not available.

The deal is possible in part because EarthLink gained San Francisco's approval to build a municipal Wi-Fi network there. The announcement follows the earlier launch of open Wi-Fi networks in Milpitas, California and New Orleans.

EarthLink, which sells a competing VoIP service called Tru Voice, said the wholesale Wi-Fi agreement is a sign of its commitment to building open networks.

Analysts, however, see other reasons for the deal.

For one, EarthLink may not have a choice. As part of any agreement to build a Wi-Fi network, cities often require companies to open any network to all.

Another reason why EarthLink is working with Vonage: "they need people to fill up their network," In-Stat analyst Daryl Schoolar said.

Vonage sees Wi-Fi as a way to expand beyond its image as just a "cheaper phone service," according to IDC analyst Will Stofega.

With increased competition from Skype, cellular carriers and cable, Stofega believes Vonage has become marginalized. They are in the 'VoIP 101' rut -- not a survivable business plan, he said.

Moreover, when Vonage first offered its Wi-Fi phone, people realized the handsets could not easily navigate the complicated authentication process needed to connect to a wireless network outside the home.

Creating its own Wi-Fi network avoids that step, improving the Vonage phone, according to Allen Nogee, senior In-Stat analyst.

Nogee said Vonage soon faces increased competition from wireless carriers who plan to offer cell phones able to also use Wi-Fi networks.



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