Will Mobile Calling Plans Go the Way of the Dodo Bird?

The mobile industry is due for a shakeup. The only question is, who's doing the shaking?

At the Citi Entertainment, Media, and Telecommunications conference this week, VoIP expert Vonage (NYS: VG) laid out some of its current growth strategies.

CEO Marc Lefar waxed poetic about his new mobile applications. Vonage's next-generation mobile platform isn't actually for sale yet, so this is a 100% forward-looking initiative. The new product will roll free calls worldwide from one Vonage user to another, as well as its own messaging system and the usual calling plans.

If this sounds a lot like Skype, you're absolutely right. Lefar says that his service will be some 30% cheaper than Skype's per-minute rates. Vonage is also a full-fledged phone line alternative, while Skype wasn't designed for that. The mobile Vonage app taps into your smartphone's existing contacts list with a smoother user interface. "Skype is heavily invested in the Skype user name," while Vonage depends on tried-and-true phone numbers.

As for magicJack VocalTec (NAS: CALL) , its iOS-only app doesn't scare Vonage: "Our product testing would suggest that it's nowhere close to same quality that we have," Lefar said, "but for folks who are looking for a cheap alternative, but don't care about 911 services, that are not as concerned about reliability, it's certainly an alternative."

In short, Vonage believes that it has a unique all-in-one communications tool on its hands.

Not all of Vonage's big ideas pan out. Lefar admits that he spent way too much effort and enthusiasm on a Facebook product. "There is a certain kind of distance that people want to keep from those individuals and their contacts, and Facebook friends are not the folks that folks want to call on a regular basis via voice," he said. That's why the bog-standard phone numbers are so important in the mobile apps -- make Vonage behave like a regular cell phone and people will use it accordingly.

That idea should keep the top brass at AT&T (NYS: T) and Verizon (NYS: VZ) up at night. VoIP services like Vonage and magicJack bypass the cherished system of airtime minutes altogether, replacing it with a surprisingly small amount of data traffic. "You could be taking over 1,000 minutes a month over VoIP and still be using only a couple of megabytes," Lefar said. So the telecoms don't even get to replace lost airtime revenues with large 3G or 4G packages -- users will get by with a less generous data plan.

Whether or not this particular Vonage app tilts the established apple cart is almost beside the point. VoIP services will inevitably replace the reigning system of voice minutes. All the telecoms will be worse off when it happens, unless they provide their own VoIP services to head the exodus off at the pass. SMS text messaging is already sinking, replaced by cheap and simple Internet-based alternatives. Voice calls can't be too far behind.

Our Foolish Watchlist feature will help you keep tabs on this revolution with up-to-the-minute updates:

At the time this article was published Fool contributor Anders Bylund holds no position in any of the companies mentioned. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.

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bps163

Well it looks as if quality just landed, Magic Jack is bringing out the new WiFi in mid summer. This will improve quality and stand up as a threat to AT&T plus VZ as they will start to lose market share to Magic Jack . The Cell apps are start to move vary fast as well as home phones lines starting to be dropped from both AT&T plus VZ. It's going to be a fast changing summer for Cell phone company and land based models as well.

March 22 2012 at 4:01 PM Report abuse rate up rate down Reply
bps163

Vonage is a JOKE and everyone knows it

February 02 2012 at 4:41 PM Report abuse rate up rate down Reply