Last month, Vonage (NYSE:VG, news, filings) rumors filled the web for a week or two and the stock surged unexpectedly, all apparently due to the company's imminent iPhone application approval. Well, that day is now here, and the iPhone app is now available - alongside Blackberry and iPod Touch versions. It's not quite what I expected, but then nothing ever is. So what is it? And what is it not?
What it is not is a replacement for your cell number, it uses your current number. In other words, this isn't like Vonage's home phone business, it's more like choosing your long distance carrier. It just purports to save you money on international calls by rerouting those calls over Vonage's VoIP network. The details aren't that clear yet to me, but there are two cases. If you are within a WiFi hotspot, the app will immediately place a VoIP call directly on that bandwidth. But if you aren't in a WiFi hotspot, it will place your call as a normal cellular call for which your normal plan's minutes will be charged. But that call hits the Vonage network for termination overseas, rather than going through whatever usual route it would be. For the privilege, you pay less per minute, or later this year a flat fee.
That's quite a bit less threatening to the status quo than a pure VoIP application that would use up bandwidth from a data plan. It doesn't seem to take marketshare or control from Apple or AT&T (NYSE:T, news, filings), and therefore it isn't surprising that it hit no roadblocks along the way. On the other hand, it doesn't shoot for the moon either. Just how many international calls do most people really need to make off their cell phones each day? Not enough to change the industry, yet perhaps enough to give Vonage a revenue boost? We'll see.
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