Internet and Land-Line Calls on One Phone
At one point, the biggest selling point in Internet phone services was price. — Companies such as Vonage Holdings Corp. and 8x8 Inc. enticed customers with calling plans that offered local and long-distance services over a high-speed Internet connection for as little as $15 a month.
Context & Ripple Effects
Internet phone service began as a pure price wedge: Vonage Holdings Corp. and 8x8 Inc. built their customer base on local-plus-long-distance calling plans starting at $15 a month over a high-speed connection. The new pitch is convergence — one handset handling both Internet and land-line calls — which matters because it signals the category has exhausted price as its differentiator.
Web portals have been circling this market too: Yahoo's approach to online phone calling, reported in December 2005, meant the low-price upstarts were already facing entrants who could subsidize calling with other businesses.
First-order effects
- Vonage and 8x8 now have to sell features like single-phone convenience rather than monthly savings, a harder message once every competitor matches the sub-$15 price point.
- Households signing up get land-line-equivalent service over broadband, putting the traditional home phone's role directly in play.
Second-order effects
- Portal-scale rivals such as Yahoo entering voice put further pressure on standalone providers whose only lever so far has been price, forcing consolidation-or-differentiation decisions at Vonage and 8x8.
- As more calling rides residential broadband, the bundled local-and-long-distance plan — the very product these firms priced at $15 — becomes the commodity everyone gives away.
Third-order effects
- If calls converge onto one IP-connected device, the local-versus-long-distance split that structured telephone pricing loses its technical basis, pushing regulators and carriers toward flat-rate models — a structural shift still contested as of mid-2006.
The trend: Voice telephony is migrating from a priced circuit-switched service toward a bundled feature of broadband access, with VoIP upstarts racing portals to own the converged home phone.