Vonage Phone Service vs. Ooma
Which is the Best VoIP Home Phone Service?

Ooma is the biggest threat facing the Vonage phone service. If it can achieve enough momentum before running out of cash, Ooma could become the number one online phone service. Vonage is virtually defenseless against this upstart that supplies free phone calls and refuses to behave like a phone company.

Comparing Vonage with a business that sells phones and gives away free phone calls will no doubt strike many as absurd. How can Ooma with less than 100,000 subscribers¹paying $0 per month be a threat to the Vonage phone service with 2.5 million subscribers paying $14.95++ per month? The skeptics maybe right, but we suspect that the Apple computer and Ooma phone have much in common including great timing. To quote the Bard: Timing is everything. There is a tide in the affairs of men which when taken at the flood leads on to fortune. ²

Vonage Phone Service - Strengths and Weaknesses

The challenge for Vonage is to retain customers who have a track record of switching to get a cheaper home phone service. They now have many of alternatives, but free is hard to beat. They will be tempted to switch again once their contracts expire.

Vonage Router

Not only is the Ooma phone service free, there are also no contracts binding them to use the service. Customers buy a phone and apart from an annual regulatory charge of about $12, that's it. As there are no contracts there are no penalties for early termination and few complaints.

On the other hand Vonage subscribers sign onto a plan that generally includes the supply of Vonage phone adapter. They can only escape by paying a penalty or a chargeback. Most of us understand and accept these terms, but what if a service is cancelled because it doesn't work or it's unsatisfactory? Vonage reviews are peppered with rants from disgruntled ex-subscribers complaining about these issues. They leave the impression that the Vonage complaints department is a stressful environment to work in.

The Vonage phone service is the best known VoIP home phone service. It secured it's first subscriber in 2002 and has grown steadily ever since. The business has strong cash flow and it's suffering no apparent financial stress. Ooma on the other hand has a much greater need to continuously acquire new customers and raise fresh capital. Are these issues that keep subscribers awake at night? We don't think so. In the worst case an Ooma subscriber stands to lose no more than the cost of a phone, but a Vonage subscriber could be up for bigger payout if they aren't prepared to continue with the service.

Ooma Phone Service - Perfect Timing

Before too long every Internet phone service will offer free online phone calls, but to survive they must generate income in other ways. Ooma derives income from the sale of phones and premium services. It's a unique strategy for a telephone company, however it delivers significant benefits to both the carrier and the customer.

Ooma Telo

1. Because the Ooma dual use cordless phones use proprietary technology they give the company greater control over voice quality and the ease with which new subscribers can get connected.

2. By offering a free home phone service, Ooma avoids one of the biggest expenses that other VoIP phone service providers must recover. It doesn't require an expensive telecom billing system with the associated infrastructure and manpower. These costs typically add at least $2-$3 to each subscriber's monthly telephone bill.

3. It's a business model that creates less tension between the service provider and subscriber. In return for buying a phone system the customer gets access to a free service. If things don't work out there are no penalties or discharge fees, that's it!

4. As an outcome of addressing the major causes of dissatisfaction with home phone service providers, Ooma has built a highly effective word-of-mouth marketing engine. It doesn't need to commit the same level of expenditure to acquiring new customers as the Vonage phone service and others.

Vonage Phone Service - the Challenge

How does the Vonage telephone service prevent customers from switching across to Ooma? Price matching is clearly not an option and contracts are only effective for the term of a contract.

Vonage must offer more value to it's customers by adding features: cheap calls to cell phones, caller ID blocks, iPhone clients, voicemail transcription, blacklist databases, call screening ... Unfortunately for Vonage these are the same features that Ooma is also rolling out as part of it's premier service.

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¹ As at the end of 2009.

² William Shakespeare

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