Vonage is on the ropes according to an article at Forbes and is trying to reinvent itself as a mobile phone carrier. During the past decade or so, Vonage offered landline service via VoIP at a reasonable rate when compared to teleco’s who were pricing their services at over double the Vonage rate. But that was then and this is now and the landscape has changed. Cable companies began to offer their own VoIP service and are taking customers away from Vonage by bundling services at a lower price.

Vonage, according to one article, was on the verge of bankruptcy before getting an injection of funds:

The problem: In a way that it didn’t in its early days, Vonage finds itself competing with cable companies that offer cheap Internet calling plans bundled with television and Internet services. Comcast, Time Warner Cable and Cox Communications all boast bigger Internet calling businesses than Vonage, which has 2.5 million customers, according to research firm IDC. “There will always be a market for really cheap voice [service],” says Paul Brodsky, an analyst with research firm TeleGeography. “Making money on really cheap voice is another issue.”

In late December Vonage began offering an application called Vonage World Mobile that allows users to make unlimited international calls on their mobile phones. That’s also $25 a month, or $15 for customers who also subscribe to the home Vonage World service.

Instead of tying customers to their home phones, as Vonage used to, these new services will be offered as applications that can be downloaded to a variety of devices, from netbooks to smart phones. Vonage is also working to enable video calling, as competitor Skype currently does, and is considering partnering with social networking, dating and videogaming sites to provide calling services for members.

One trend in Vonage’s favor: More people are giving up their landlines and going wireless. “If VoIP growth is going to come from anywhere, it will be from mobile,” says IDC analyst Irene Berlinsky.

I am a Vonage user and did not realize that the company was have serious financial issues. It makes one wonder if people will want to use the Vonage mobile services when others are already offering steep discounts on cell phone and cell phone plans.

I know that Walmart has their new offerings of $30 and $40 a month cell plans that are low price leaders and which Vonage will have to compete against. Whether or not people will continue to use Vonage or just switch over to cell phones completely remains to be seen.

What do you think?

Comments welcome.

Source – Forbes