Vonage And Skype Turn Up The Heat--On Each Other

The 800-pound gorillas of VoIP--Skype Technologies and Vonage Holdings--have so far been addressing different markets, but each firm is finally beginning to move into the other's space.

Vonage has primarily targeted North American public switched telephone networks (PSTN) but its paid service has been creeping into international markets. Skype, in the meantime, which is primarily used for international calling, has been making big inroads into the U.S. market.

In recent days Skype has launched its SkypeIn service, which offers subscribers the capability of having three numbers that can be called from the PSTN. Prior to that Skype users could talk free to other Skype users, but non-Skype users couldn't call Skype users directly. Vonage has begun offering its service in the United Kingdom and has offered virtual phone numbers in Mexico City for Vonage users.

"Our device is portable," said Vonage spokesman Mitchell Slepian. "People take it all over the U.S. and they take it out of the country, too." While the U.S.-based firm doesn't keep figures for international usage, there is anecdotal evidence that the Internet calling service is being used all over the world by users who configure their Vonage devices to do so when they leave North America.

Slepian noted that Vonage-to-Vonage calls are free. Vonage offers different calling plans, with the most popular is priced at about $25 a month. It aims its service to compete with U.S. PSTN providers, and claims more than 600,000 paid users.Skype spokeswoman Kelly Larabee said Monday that Skype has registered more than 3.4 million users in the U.S. Most of them are using the free Skype-to-Skype service, but increasingly, U.S. customers are signing up for the paid SkypeOut service, which enables callers to initiate Skype calls from their computers complete calls for a few cents a minute to worldwide users over PSTN networks. Skype reports that more than 1.2 million global subscribers are using SkypeOut.

"The U.S. is one of our key markets," said Larabee. "The new SkypeIn feature is an extension of our service and it will help people use Skype more. SkypeIn is still in Beta, but it should be ready for full launch by summer." SkypeIn will be offered for a three-month subscription at $13 and for a 12-month subscription at $39. Voicemail is included in the service. Typically a user can sign up for three separate phone numbers--even in different geographical areas--with SkypeIn.

To date, the two services haven't targeted each other directly, and some subscribers use both services. Competition is certain to compete as the volume of callers using the Web grows and as each company increases services and marketing in international markets.

Vonage views U.S. PSTNs as its most vigorous competition and indeed, the company has been competing vigorously with AT&T's CallVantage VoIP service. Vonage has many marketing partnerships ranging from retailers like Radio Shack and Best Buy, to deals with organizations such Campus TeleVideo, which offers discounted Vonage service to students at 120 universities.