Vonage Expands into VoIP Networking With New Providers

By Greg Scoblete On Sep 6 2004 - 6:00am

VoIP service provider Vonage added two new hardware providers to its retail portfolio last week with an eye toward moving Internet telephony into a networked home environment and broadening its retail penetration.

The company also announced a partnership with office superstore chain Staples.

Networking vendors Linksys and Netgear will independently supply VoIP networking devices pre-programmed to access the Vonage VoIP network this month and in October, respectively.

The products will be co-branded and offered alongside Vonage's other retail starter kit, which will remain on the market. Motorola supplies a Multi Terminal Adapter for Vonage's existing retail kit.

According to Matthew Deatrick, Vonage's retail sales VP, the Linksys' equipment allows Vonage to court consumers running home networks.

“The Motorola product is for consumers with a single computer. The Linksys products are geared toward networked homes,” he said.

The Linksys products include the PAP2 Phone Adapter for a suggested $59 and the RT31P2 Broadband Router for a suggested $89. Both are preprogrammed to access Vonage's VoIP network and will bundle service plan literature to guide users through online sign-up.

Both Linksys products are equipped with two standard telephone jacks and are compatible with cable or DSL broadband Internet modems.

The PAP2 phone adapter comes equipped with two RJ-11 phone ports and one Ethernet port. Users connect their existing home phones to the phone adapter and then connect the phone adapter to a router or modem via the Ethernet port to place calls over the Internet.

The RT31P2 broadband router features three 10/100 BaseT Ethernet ports and supports advanced security management functions and Quality of Service (QoS) to prioritize voice data for improved voice quality. This latest version of the Linksys wired router integrates the phone adapter function, allowing consumers to share a broadband connection across several devices while also making VoIP calls.

The router comes with a 3-port switch for connecting three Ethernet devices directly to the network. Users can also connect a wireless access point to the router.

Linksys will assume distribution duties for the two VoIP products, Deatrick said, and leverage its distribution network, giving Vonage an expanded reach beyond its existing relationships with RadioShack, Circuit City and Best Buy.

Vonage also announced that Staples will carry both of the Linksys VoIP products in all of its nearly 1,200 stores and on its e-commerce site.

Later this fall, Vonage will distribute new retail starter kits featuring hardware provided by Netgear. The two companies announced a partnership to develop a suite of broadband telephony devices incorporating the latest version of Texas Instruments' VoIP and Wireless LAN (WLAN) chipsets.

The products will include a voice-enabled 802.11g wireless router followed by a wired two-port telephone adapter/router. Vonage expects the products to ship in October. The wireless router will feature a built-in adapter for converting analog voice calls to digital signals that are then sent over the Internet. The router has two ports for a plugging in ordinary home phones.

While the VoIP market is still in its infancy, Vonage is broadening its assortment to capitalize on growing demand, Deatrick said. “The market is somewhere in the middle of the early adopter phase."

The demographics will soon shift toward more mass-market consumers as they discover the low-cost alternative that VoIP telephony offers, Deatrick added.

While Vonage was an early entrant into the retail VoIP market, other competitors, ranging from lesser-known start-ups to established telecommunications and cable brands, have jumped into the arena. Deatrick welcomed the competition.

“The more they advertise VoIP, the more customers we'll get,” he said.

“We discovered a few things from our retail partnerships,” Deatrick noted, principally that “VoIP responds to marketing.”

“It's typically harder to sell a service through retail. The cost of acquisition is higher, but the marketing experience we had with our direct sales has helped us,” Deatrick said.

Market research firm In-Stat/MDR (owned by TWICE parent Reed Elsevier) recently projected that by the end of 2008, 10.3 percent of the 59.1 million broadband users in the United States will use IP telephony.