May 17, 2004 12:06 PM PDT

Vonage cuts Net phoning prices

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Internet phone service provider Vonage is the latest among a slew of leading Net telephony companies to cut prices in a battle for customers.

Vonage, which is among the largest and most recognized providers of a technology known as voice over Internet Protocol (VoIP), on Monday slashed the price of monthly unlimited North American dialing from $35 to $30.

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The carrier's new monthly price puts its subscription rate on par with what's become the industry standard cost for Net phone call plans, made cheaper because they use the unregulated Net rather than the phone companies' highly regulated and taxed networks.

Vonage recently passed the 150,000 subscribers mark, an "inflection point" for the company, Vonage Executive Vice President Lou Holder said. As the number of subscribers grows, traditional phone carriers charge less to connect Vonage calls to their customers, and the price dives for the Net phones that Vonage distributes to customers, he said.

Vonage's price cuts are likely to force smaller players into further dropping prices on calls to differentiate themselves. But Holder said Vonage won't likely change prices again, until it has the 450,000 subscribers it expects to reach sometime in the fall of 2005.

One major Net phone provider that hasn't reduced its prices is AT&T. Its CallVantage service, introduced two months ago, costs $40 a month after an introductory $20 a month for six months. On Monday, AT&T spokesman Gary Morgenstern said the carrier doesn't plan any price changes.

"Prices are all over the place," Morgenstern said. "We are selling ours on quality of service and a differentiating feature set."


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