Independent VoIP leader Vonage Holdings will announce Monday a deal to resell wireless Internet services from EarthLink, in cities like Philadelphia, New Orleans and Milpitas, Calif., where EarthLink has municipal Wi-Fi networks.
No pricing is set yet on the Vonage broadband service, which will be bundled with the company’s VoIP offering and will support a promised “next generation Vonage Wi-Fi phone,” according to the announcement’s press release. And while the deal might seem to be detrimental to EarthLink’s own VoIP service, TrueVoice, an EarthLink exec said Sunday night that it’s “part of the company’s DNA” to sell wholesale network services to any provider who wants access, and to compete on price, support and services at the application layer.
Stephen Howe, vice president of EarthLink’s voice business, said the Vonage deal was “part of the company’s belief that if you have a network, you should sell access to anyone who wants to buy it.” Howe said EarthLink is no stranger to competing with suppliers, since it buys wholesale DSL services from BellSouth.
“We [with TrueVoice] certainly do compete with Vonage,” said Howe, quickly adding a line about having better service and support. He also said that EarthLink is slated to finally start beta testing a promised standalone Wi-Fi phone in its Philadelphia and Anaheim, Calif., markets later this month. EarthLink also sells a wired VoIP solution with Covad.
According to the release, Vonage has signed a three-year deal to buy Internet service wholesale from EarthLink, and then resell the Wi-Fi access with some woo-hoo and the Vonage brand name. The release also says that Vonage “plans to provide hardware, such as a wireless modem device, and other complementary software tools to customers that will be using the service as an alternative to DSL or cable modem access.” Stay tuned Monday morning, as we are scheduled to speak with Vonage chairman Jeffrey Citron for more details.
2 comments so far
11:10 AM PT
Those this might sound rather crazy it is astoundingly true!! Good way to go for Vonage!!
Reason I state this is because of the management of Earthlink. I mean I live in Philadelphia, PA and the Wi-Fi has been available but no one knows!! Earthlink has done absolutely no advertising for the service nor have the picked the right location for the more poverty areas in my opinion who is in need of it. So Earthlinks new business model for them may be best now that they are incompetent to make things work.
Vonage is taking a hell of a step noticing this and doing it well with the offering of a so called new phone…this is still vonage. But overall it is a chance for them to infect the users brain with the words wireless, cheap, internet, and phones. Which from what Vonage learned from Elinks implementation, they have a chance here at least (which is why I believe they are starting here first).
CyKiller is coming back…
1:15 PM PT
I gotta agree with Om here… First off in the cases where muni wifi is free - how is Vonage going to resell that? Second I don’t see how this adds to their top line significantly - at least anytime soon because there just aren’t that many places muni wifi is available - say nothing of the bottom line impact - especially considering the costs of ISP customer service… This is just one more thing to toss out in conf. calls to stave off Wall Street disgust and try to excuse bad numbers when the core business plan fails to meet metrics…
Being the big kahuna in low cost VOIP is not a recipe for success - not given customer acquisition costs. The company/Citron is desperate to get investors to ignore that cost (as if somehow in the future they won’t have to spend money to acquire customers - I saw him bragging about “operating profit” before customer acquisition costs to Forbes today) but the fact is that they will always need to spend money to acquire customers - even if the goal is merely to stand still from a revenue standpoint because of natural churn.
Pets.com was the dominant low cost supplier of dog food - and selling it was probably profitable before shipping costs… See how well that business did…
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