VOIP for Life?
The move is not a huge threat to Vonage or any of the other VOIP carriers with nationwide or international reach. But it is significant in that it calls out residential VOIP service for what it really is -- a low margin service differentiated mostly by clever marketing and cutthroat pricing.
The phone-for-life plans will be available through RNK’s network of resellers including Galaxy Internet Services, ProSpeed.Net, and VoIP2SAVE. The plans will initially be available in Massachusetts, New Hampshire, New York, and Rhode Island, where RNK has switches and other facilities (see RNK Uses Lucent for VOIP).
RNK has about 3,000 residential wireline customers and about 1,500 VOIP customers, according to the carrier's president and CEO Richard Koch. The company, through resellers, is also in the calling card game, selling minutes of network access via kiosks and convenient stores. [Ed. note: Look! We have proof!] Koch says RNK pulls in about $25 million a year in revenues and is a profitable company.
"Chances are if you become a customer of ours, we'll someday be able to sell you something else," says Koch, explaining the offer's rationale. Koch says that based on residential customer calling averages, RNK's costs to maintain phone-for-life customers are miniscule. "If you stay our customer for ten years, we'll have only spent about $400 of the $999 you paid," he says. In the $999 deal, RNKVoIP provides a telephone number, a phone, and unlimited calling to domestic U.S. locations, Canada, and 20 other countries, plus 21 additional foreign cities. What's not to like?
There is one thing: It may be difficult for potential customers to bet so much on a seven-year-old wholesaler that has no face or brand as a consumer company. Daryl Schoolar, senior analyst at In-Stat/MPR, says he's “extremely skeptical about giving money to a company that hasn’t been around that long that [he's] never heard of.”
Schoolar compares the phone-for-life service to the free DSL offerings that were flying around a couple years ago. “Maybe they are using this to get publicity to get people to look into them and buy some of their other services,” he says.
Koch cheerfully cops to the price game. With VOIP providers lowering monthly rates and trying to undercut one another every other week, Koch says he decided to pursue the $999 plan because it made life simple for everyone involved. "Just pay us once and you'll never have this hassle," he says. Strange as it sounds, RNK's offer may spur some copycats in the near future. With an estimated 1,000 companies offering VOIP services worldwide, other VOIP upstarts and even major carriers have already offered flat-rate, year-long plans to VOIP customers.
For example, SunRocket Inc. recently announced a $199 one-year package that comes with a wireless handset (see SunRocket Launches Internet Phone). Vonage and AT&T Corp.'s (NYSE: T) CallVantage also have one-year options for consumers.
— Chris Somerville, Senior Editor, NGS