Verizon is readying a new product that will marry its wireless phone service with an Internet home phone that uses a broadband network to make calls.
The new phone system, called Verizon Hub, connects to any broadband line to provide home phone service using the Internet. It integrates with Verizon Wireless service so that customers can send and receive SMS text messages directly from their home phone and use location-based services, like Chaperone and VZ Navigator. It also provides additional Web-based services, such as an online calendar and a contact list that syncs with Microsoft Outlook.
The service is designed to give families or multiple people living in a household an alternative to the traditional copper based phone system.
The Hub will go on sale at Verizon retail stores February 1. It costs $199 after a $50 rebate. Customers must sign up for a two-year contract with a monthly charge of $34.99. The monthly service charge includes unlimited local and long distance calling in the U.S., Canada, and Puerto Rico. The service is only offered to Verizon Wireless customers, and the integrated cell phone service only works with Verizon Wireless phones. The Verizon Hub is considered to be a part of Verizon Wireless in-calling plans, so Verizon Wireless subscribers can send unlimited text messages to the Hub and calls made to the Hub phone aren't counted as part of their anytime minute usage.
The product itself consists of a cordless handset that sits in a docking station that has a 7-inch touch-screen display. From this touch screen, users can access several Internet widgets for news, sports, and traffic information. It's also where users can manage their calendars and send and receive text messages from Verizon Wireless phones.
The service is integrated with Verizon's location services. For example, users can look up nearby movie theaters, purchase tickets, and get directions right from the Hub. These directions can then be forwarded directly to a Verizon Wireless phone via an SMS message.
"The purpose of the Hub is to deliver specific content to help our customers manage through their day," said Mike Willsey, marketing director for Verizon Wireless. "And it doesn't require them to turn on their computer or fire up a browser to access the information they want. It's always on."
Additional "satellite" cordless handsets will be available when the Hub launches next month. Pricing for additional cordless handsets hasn't been announced yet. But Willsey said they will likely be sold as part of a bundle.
Bad news for Vonage?
The service that Verizon is offering is very similar to services offered by other voice over IP providers, such as Vonage, which Verizon sued in 2006 for infringing on its technology patents. The companies eventually settled the legal dispute after a long court battle. And Vonage was forced to pay $120 million to Verizon.
Both services offer phone service over a broadband connection rather than the traditional phone network. This means if the broadband connection is disrupted or the power goes out, so does the home phone service. Both services also offer E911 service. Like the Verizon Hub, Vonage also offers many Web-based calling features that can be managed from a computer.
The main difference between the two services is that the Verizon Hub also offers integration with cell phone services, and the Web services can also be managed from the Hub, instead of just from a computer.
But Verizon representatives say they aren't trying to compete against Vonage or any other voice over IP service. Instead, they're trying to offer their wireless customers an alternative to home phone service while also providing added features and benefits.
"We are really targeting people who are cutting their traditional landlines," Willsey said. "People are spending between $50 and $60 a month on that service. And we see wireless and voice over IP as an economical alternative that also offers more features and more flexibility."
Indeed, the Verizon Wireless Hub plan is cheaper than a comparable calling plan from Verizon Communications, a parent company of Verizon Wireless. Verizon charges $40 to $50 a month for unlimited local and long distance calling in the U.S., Canada, and Puerto Rico for its traditional phone service. And without an extra international calling plan, a call to the U.K is $2.89 a minute from a Verizon landline.
That said, the Verizon Hub service is still more expensive than Vonage's Internet calling service. Vonage charges $24.99 a month for unlimited local and long distance calling within the U.S., Canada, and Puerto Rico as well as to five countries in Europe.
By contrast, the Verizon Hub service is $10 more a month, and the company charges wireless rates for its international calls. But a Verizon spokesman clarified that Hub subscribers get the discounted wireless rates without having to pay the $3.99 that its wireless subscribers pay to get those rates. This means that while a Vonage user can call any landline phone in the U.K. for free as part of the $25 a month service fee, a Verizon Hub user would have to spend $0.06 when calling a U.K. landline to make the same call.
But the real kicker is that users must dish out $200 for the Verizon Hub hardware, whereas Vonage provides its wireless equipment as part of the service and allows people to use existing phones.
And Vonage isn't the only VoIP service on the market. There are already several cheap calling alternatives available today. Other cell phone operators are also offering VoIP services. T-Mobile offers a home phone replacement service called Hotspot @Home Talk Forever that allows its wireless customers to add a Voice over IP service for $9.99 a month.
With the U.S. in its deepest recession in a lifetime, I'm skeptical that consumers will be looking to make the additional hardware investment and pay more per month for a service that they can get much cheaper from other providers. But Verizon is confident that consumers will find its service appealing even in tough economic times.
"We think customers will find a ton of value in this product because it offers so much more," Willsey said. "So we think this is the perfect time to launch this product."