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The Visceral Urge to Vonage

The idea of boosting revenues with value-added services has long beckoned to ISPs, yet few such services have proved profitable. Members of the ISP-Wireless list ponder Vonage's VoIP program as a possible moneymaker.

[February 28, 2003]

On ISP-Wireless in February 2003, WH wondered:

"I'm trying to figure out if I want to push Vonage to my customers. It doesn't seem to make a whole lot of sense to me. Isn't it a bandwidth hog? The 'profit' margin isn't all that high in the first place and we have to supply the bandwidth.

Could someone explain why it makes sense to us?"

[JH quickly responded] "A reason for people to use your service as opposed to the cable company."

[And RS quipped] "Do the telcos out of some revenue? Of course, that theory could backfire . . . they'd raise T-1 rates to compensate for loss in local call revenue."

In a more serious mood, MV offered multiple answers:

"1) You're all ready selling the bandwidth. If you're on a metered billing approach (which I personally think you ought to be), you'll get additional revenue from usage if they actually use it enough to go over the top of their plan.

2) If you're already making money, any additional revenue is just that... additional. This is a good thing, methinks.

3) For the most part, I doubt that the 80 Kbps impact of a call on your network is going to be as big as suspected. We watch usage on client IP PBXs as well as on the service clients we have (enterprise and educational accounts as large as 300 users) and they don't actually end up using the phone as much as I think most of us feared initially."

[BB concurred] "80 Kbps just isn't much bandwidth, IMO. We sell bandwidth. What the customer decides to do with it is largely up to them. The more they need the better our numbers look.

Also, Vonage has a referral incentive program. Current Vonage customers can refer potential new Vonage customers. If the referral does indeed sign up for Vonage service, both parties receive a $40 credit on their Vonage bill. I did actually get a prompt credit for a recent referral. It's the little things that can really make your day sometimes!"

VP had a contrasting experience:

"It is just a value added service for you customer. As for the profit, personally I have sold a lot of Vonage accounts but have never been paid."

[MV advised] "If you're a reseller and supposed to get paid, I'd suggest you'd better start looking into that. Value-added services entitle the provider to revenue."

MS speculated about variations on the standard reseller program:

"I thought of trying to brand it and sell it as a part of the wireless/fiber services that I offer, but I've run into two problems that seem insurmountable.

1) I can't seem to find anyone at Vonage that wants to work with me on this experiment.

2) I'll need to run a lot more APs to keep the latency down low enough for good VoIP—especially as I add Vonage customers—because of the high throughput that Vonage requires."

— End