Verizon has launched a device that, much like a MagicJack or Ooma, will connect to your existing home phone and deliver voice calls for a fee, only this service will use the Verizon Wireless (s vz) network instead of a home broadband connection. The service, which costs $20 a month ($10 if you add it to an existing Verizon Family plan), is an encroachment by Verizon into the voice businesses of its copper-loving rivals and may even split the cable bundles by offering an alternative to a triple play.
A consumer would connect a home phone to this box, which has a power supply to keep the landline working in case of a power outage, as well as a cellular radio that provides the connection for the voice calls to go over the net. All 911 calls go over the cell network. Ironically, Verizon just received a letter from the FCC (PDF) about its failure to connect about 10,000 wireless 911 calls during a showstorm in the Washington, D.C., area this past January. At $20, the price is about what I pay for a stripped-down version of a land line provided by AT&T (s T). I’ve asked for a trial unit to see how the Verizon service compares.
Here’s where the service gets interesting. Verizon is basically betting on wireless and fiber as the transport mechanisms for video, voice and data. It has sold off its copper assets in most areas, and with this offering, can expand its broadband and voice offering beyond its FiOS footprint via its wireless network. Scoring an extra $20 a month for voice traffic over its wireless network is a coup if subscribers sign up, because voice traffic isn’t bandwidth-intensive. Once the cost associated with the device is paid, Verizon will have a fairly high-margin service. In the last few months, I think I used my wireline phone for 10 minutes (actually to make a call to Verizon after I dropped my cell phone in a bathtub).
So now, Verizon can not only take business away from AT&T (s t) and other old landline providers; it can also boost its margins. In addition, it moves into new geographic markets and can split the bundled offerings from video and broadband providers. Consumers like bundled services because they get one bill and a manufactured discount. Now, Verizon can offer a mobile broadband and mobile and home phone service, creating a compelling bundle and taking customers of voice bundles from cable and other telcos. Given that Comcast (s cmcsa) managed to add 257,000 voice subscribers in the fourth quarter of 2010 and is the nation’s third-largest phone company, this isn’t an insignificant attack.
As voice and video services become all-IP and as mobile networks get faster, it’s possible consumers may only distinguish between mobile and wireline broadband. Obviously, video is still going to take some work. But if that happens, Verizon has set itself up for the future pretty neatly with this offering.
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