Skype Versus Vonage

17 Comments

There is a school of thought which believes that Skype’s value added services, SkypeIn, SkypeOut and Skype Voice Mail could become a major nightmare for Vonage. Allan Tumolillo, COO of Probe Financial Associates is one such person and he believes that, “Skype now has a product set similar to Vonage and cable and telco providers. What is most important, though, is that Skype’s product set allows us to examine what the likely cost to a subscriber will be from VoIP providers.” He believes that others will have to lower their price points to meet Skype, or else. Most vulnerable he thinks is Vonage. I kinda agree. Linux hasn’t really killed Microsoft but took a major bite out of Sun Microsystems’ game, leading to speculation that the company might go private, though that has been denied by Scott McNealy.

17 Comments

BigRed

Comparing apples to apples would be more in order. If you use skype and want to talk to another friend who has skype, it’s free, period. So encourage as many as you can to use it and you pay only the cost of your internet connection. Period.

With Vonage, you still have to pay for it. Even if you’re only talking to other vonage users. It’s like a double payment for the same line. Free is still better than cheap.

Where it gets more “apples to apples” is when you want to call someone that is not in the network (landline, cell phone, etc). I can understand this, as it costs money to maintain the telecom infrastructure, but Skypes prices are more realistic.

Encourage people to use skype to skype. It’s free! But I do guarantee the telecom world will spin on it’s head trying to shut it down because we’ll be taking away their already over inflated profits.

D-cat

I forgot to note that if you wish to have an incoming number with Skype, it’ll cost you €10 (currently $12.17 USD) for 3 months, or about $4.06/month, taking the value of 338 minutes, bringing the threshold value down to 852 minute talk time per month.

That’s a limit of about half an hour a day average. That would be okay for me, but my family easily overdoes that.

That tells me as a consumer that if Skype really wants to compete with Vonage, they will need to offer a competetive all features included unlimited use plan. If they don’t, they may go the way of their pedicessors, like MediaRing Talk and BuddyPhone; They still exist, but they missed their window to take the market, and much of the market has moved on. Vonage already has a good grip on North America, and Skype, with a decent client base worldwide, is in prime position to take hold of what’s left. I like the idea of VoIP-Telephone communications. I’d hate to see Skype miss its window.

D-cat

Skype is starting to get into the hardware game. They have made an agreement with Netgear to produce the first Skype WiFi phone. A prototype has been made and successfully tested. I have no further information, but I would think it reasonable that if they intend to do battle with Vonage, they would also make a VoIP Ethernet-Phone adapter, similar but simpler to the Vonage routers.

Both Vonage and Skype call their own customers for free. Skype does not have a monthly unlimited use plan, but their software is free to download and try, and their minute rates are very cheap.

Vonage does have a monthly unlimited plan that with the included features is half the price of the local ma’bell price. They also have less expensive rated plans still very fairly priced. Vonage has also recently released a software version of their service, allowing you to try it on your computer before buying hardware. Still however, you cannot use the Vonage service without buying a plan first. I think this is why Vonage boasts over 1 million users, while I’m looking at about 2.5 million users logged into Skype right now (2AM EDT) and have seen it well over three million.

Both services work with Windows 98+ and Macintosh. Only Skype has a Linux Client that I know of. Only Vonage currently works with your present telephone.

If your physical communications needs are met by both, then I guess it comes down to how much you talk in a given month’s average. Skype’s charge for most of the North American populous is 2.1¢/min (USD) while the Vonage Monthly Unlimited plan is $24.99. That $24.99 buys you 1,190 minutes on Skype. Therefore, barring other factors, that’s what I’d make as my threshold as to which service I’d choose. If you talk well less than 1200 minutes a month, Skype is your better deal. If you regularly just have to talk beyond that, you’re better off with Vonage.

Lowreview

Skyoe sucks. The beauty of vonage is that it uses reegular phones and can be used to call regular phones with little interruption to the customer. This is key. Skype can hit the nerds all it wants. The average joe is a much larger demo than Nerds.

Second, Vonage is putting itself in a super position with the WiFi phone. Give the phone a few version changes before we get total internet capabilities on a WiFi phone with a Vonage account. Then Cell phone providers will run scared.

25/month for WiFi enable Vonage line vs. 120 month for 2000 minutes on a cell phone?

bye bye cell phone.

Monarch

Kal – 1.8 Euros for 3 short calls -where were you calling? Most countries are only 2c per minute. Something is wrong

Om Malik

kal, but the upside of skype is that you don’t pay the fixed line charges which you pay, even when you are not using the service. i think that is the critical difference. in the end, you end up saving a ton of money doing that.

Kal

Skype is more expensive than land lines. Just set up SkypeOut and made three short calls to landlines. Cost 1.8 euros.

Aswath Rao

First of all, the point of my original comment was to suggest that Skype’s cost structure is not so different from other VoIP providers. There are indications that Skype has to, if not already, deploy similar network elements. Now the marketing costs are also creeping in. As Skype migrates to “vernacular” market they will look more like others.

DG Lewis

There are differences in cost structures between Skype and other VoIP providers. Softswitches cost money, as does the supporting infrastructure (network infrastructure like routers and conditioned space, operational infrastructure like support systems and staff). Without softswitches and the supporting infrastructure, with minimal customer care, and with no real marketing expenses, Skype has very low fixed and per-customer costs. And Skype charges for those items for which they incur incremental cost (In and Out, which require gateways, and Voicemail, which requires servers).

It’ll be interesting to see whether this strict model of charging the cost-causers succeeds better than a subscription model, which Tom Evslin has espoused.

Om Malik

OH i agree on that point. there are no free phones in this world. i think even as they start offering in/out services, they all start adding up in terms of expenses. it is going to change, eventually… they are seemingly aligning their business to that future reality. but i agree. with you!

Aswath Rao

It could be. But the question is are tey becoming more like any other company rather than one with no incremental cost.

Recall that for a long time Vonage was claiming that it doesn’t own any network and that is why they could offer their service inexpensively. I am only raising the possibility that things may be changing in Skype world as well.

Om Malik

alternatively, the affiliate program would be one way to get super scale up? don’t you think?

Aswath Rao

Dmitry Goroshevsky claims that “But our monitoring data indicates they already deploying that sort [media relay points] of infrastructure. Now what is the difference between Skype and Mr. Bell?” So probably there infrastructure cost is not that “non existant” as onw would think. Skype is introducing Affiliate program, with commissions. So probably viral marketing is losing its steam. Notwithstanding these, those in the know think that Skype’s cost structure is lower than other VoIP providers. I for one still think that Skype and other VoIP providers will be comparable.

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