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Vonage Review

Tallahassee Democrat

from www.tallahassee.com

Posted on Sun, Jun. 20, 2004

Phone meets Internet

VOIP makes competitors, regulators take notice

By Rocky Scott

DEMOCRAT STAFF WRITER

It has come to this: Your home phone, relegated to gathering dust in the corner because of the wireless revolution, has dusted itself off and become the latest trend in telecommunications technology.

"Voice Over Internet Protocol (VOIP) lets you take your home phone with you, even overseas," said Mitchell Slepian, a spokesman for Vonage Inc., a New Jersey company that has led the way in transmitting phone calls over the internet.

Here's how VOIP works: a company provides you with a small multimedia box that attaches to your DSL modem, your cable box or, via Ethernet, to a T-1 or T-3 line.

Plug your phone into the multimedia box and connect the box to your computer. This gives you conventional voice service and high-speed Internet service on the same line.

If you leave your house or business, you can take the multimedia box with you. If there's a broadband connection at your destination - a hotel, for instance - just plug in the box when you arrive. All calls to your number will be routed to your new location.

Modems for Vonage service can be ordered directly from most VOIP providers. Locally, they are available at Circuit City or Radio Shack stores. The cost for starting service through the stores, including the modem, is $79.

Starting service online at the Vonage Web site (www.vonage.com) is $29, plus shipping and handling for the multimedia box.

Formed in 2001, Vonage now has more than 120,000 customers making 5million calls a week, Slepian said.

That's minuscule compared with the number of calls handled by traditional phone companies, but the big players in the telecommunications game have taken notice.

BellSouth, Sprint and AT&T, along with Comcast Cable and Time Warner Cable, are already offering VOIP or making plans to do so in the near future. The reason, of course, is money - more specifically, the lower monthly charge for VOIP.

Free from taxes, regulation

Vonage rates start at $14.99 per month for 500 minutes of calling time. Better still, those pesky taxes that cling to your conventional phone bill like ticks to a hound are nowhere in sight.

That's because VOIP is - so far - unregulated.

Slepian said Vonage's $29 package gives its customers a multimedia box, unlimited calling each month and overseas calling for just a few cents a minute.

"I basically like the fact I can take my number anywhere I want," said Charles Davidson, a commissioner at the Florida Public Service Commission, who dropped his conventional phone service in December and switched to VOIP.

Davidson said low monthly rates and the lack of taxes and surcharges on his phone bill played a role in his decision.

"We see a lot of regulation and taxes for local, state and federal governments that may reach 40 percent of a customer's (local) phone bill," he said.

But some of those taxes go to support what Davidson calls social contracts between government and phone companies, such as the 911 emergency telephone system and guaranteed phone service for low-income families.

Davidson said regulators were going to have to figure out how to keep providing necessary services while resisting the urge to regulate VOIP in the same manner conventional phone companies have been regulated.

"The industry needs to be told, 'We, as a society, have this goal of 911 (service),'" Davidson said. "'You tell us as a technological matter how to get there, come up with solutions and we will figure out how to fund it.'"

Battle will be 'interesting'

That regulatory posture is not necessarily shared by more conventional phone companies, who say VOIP now enjoys a competitive advantage because it is not regulated or taxed.

"Sprint thinks all voice calls should be standardized as far as price goes," said Nanci Schwartz, a company spokeswoman.

James Fisher, a Sprint spokesman in Washington, D.C., said Sprint thinks VOIP service is "essentially a voice call to a voice phone" and should be regulated as such.

Meanwhile, Todd Smith, a spokesman for BellSouth in Atlanta, said the battle over whether to regulate VOIP was going to be "interesting to watch."

"It's something that's changing day by day," he said.

As far as regulation goes, Smith said BellSouth, which started a trial VOIP service for businesses on June 8, "is in favor of limited regulation that is on a fair plane across the industry."

Michelle Hitt, a spokeswoman in Atlanta for AT&T, said her company started with VOIP for business and now offers it to residential customers under the name "CallVantage."

Hitt said the service, which has a base price of $34.99, rolled out on Monday in Florida and should be available in 100 markets - not including Tallahassee - across the United States by the end of the year.

Davidson said he was pleased the VOIP market had attracted large and small companies. He said competition would increase the availability of the service and keep prices down much like what has happened in the wireless industry over the past few years.

And he said state regulators were going to have to shift their roles from business regulators to "social regulators" as technology continues its rapid advance in the telecommunications sector.

"I think the role for the Florida Public Service Commission and any state commission will be to help implement policies to ensure that national social obligations are implemented at a state level" while minimizing regulatory control, Davidson said.