Internet telephony service provider Free World Dial Up (FWD) has decided that free isn’t making ends meet anymore. They’ve announced that their previous free service will now cost $30/year. FWD is an interconnected SIP network that allows users to connect with each other for voice, IM, and video applications. FWD does not interconnect with the PSTN. They claim to have “near a million” users worldwide. FWD was founded by IP telephony pioneer Jeff Pulver, who also cofounded Vonage. In his blog, Pulver notes, “I don't know if anyone predicted that the entire VoIP industry would end up with business models dependent on traditional telecom revenues, but it seems hard to deny with Skype, Jajah, Ribbit, and a long list of others chasing per minute revenues.” Seems like the VoIP free ride is coming to a close. Offering services for free may provide you a real competitive advantage, but it sure won’t put the kids through college. Any thoughts on what FWD will call itself now? “Free” no longer seems apropos.

SureWest announced their quarterly earnings today and revealed interesting insight into the future of the telecom business. Of the 3,900 traditional access lines they lost in 2Q08, 1,400 of them chose to stay with SureWest and selected a VoIP product. They converted 36% of their access line losses into VoIP customers – customers who may have been lost if not for their VoIP product. Additionally, SureWest reports that VoIP is a “…potentially higher-margin product when compared with SureWest’s traditional land line service due to its bundling requirements for SureWest data and long-distance…” As usual, SureWest is demonstrating leadership in the telecom space. By introducing a VoIP product or “Digital Phone” as they call it, they are creating a reason for customers to stay with them, not leave them. By bundling digital voice with their broadband product, they are meeting their cable and VoIP providers head on, with similar features, including unlimited LD and other feature rich packages. AT&T is following a similar strategy with their U-Verse voice product.

I recognize all telcos don’t have the flexibility of a SureWest, due to regulatory and settlement obligations. In some regards, many telcos have one hand tied behind their back when it comes to offering flexible IP based packages in their incumbent territories. But as the initial SureWest numbers suggest, providing IP based services can create flexibility and options. Options that allow telcos to adjust to the marketplace and possibly help stem the tide of growing traditional access line loss.

Vonage launched VonagePro which allows customers to utilize a Vonage softphone in synch with their home phone. VonagePro keeps customers “connected” by allowing simultaneous ring of a customer’s home phone and softphone. The softphone client, branded as Vonage Companion, resides on a customer’s PC or laptop and can make and receive telephone calls. The softphone can be tied to an existing home phone number. VonagePro will be priced at $34.99/month and includes Vonage’s Residential Premium Unlimited Plan.

Vonage has a deal in principle to refinance the debt that is threatening to bankrupt the company later this year in December. A new financing deal structure will be lead by Silver Point Finance. It’s a fairly complex deal, requiring Vonage to gain additional financing to cover the total $253 million in debt coming due this December. Under the agreement, Silver Point will provide $125 million, and will work with Vonage to raise the remainder. Vonage may have to tap its dwindling cash reserves to close the gap. Vonage has been facing certain bankruptcy for some time, and has made similar announcements in the past few months, only to have to come back to the drawing board. Will this announcement follow suit? It’s tough being the company that pushed VoIP into the mainstream and provided early competitive momentum in the telecom marketplace. What are the odds that they will make it?

AT&T today announced the availability of U-verse Voice in several Ohio markets, including Columbus and Akron. U-verse voice is an IP voice product which is bundled with U-verse broadband and video services. U-verse voice adds a suite of features to traditional voice service including, unified messaging, click to call from the TV or PC, simultaneous ring of up to four phones, and a web based call management portal. AT&T offers to U-verse voice plans; 1) U-verse Voice Unlimited, which includes unlimited local and nationwide minutes for $40 a month, and 2) U-verse Voice 1000, which includes 1,000 Call Anywhere minutes to any location in the U.S. or U.S. territories for $30 a month.

AT&T today announced the availability of U-verse Voice in parts of Oklahoma City. U-verse voice is an IP voice product which is bundled with U-verse broadband and video services. U-verse voice adds a suite of features to traditional voice service including, unified messaging, click to call from the TV or PC, simultaneous ring of up to four phones, and a web based call management portal. AT&T offers to U-verse voice plans; 1) U-verse Voice Unlimited, which includes unlimited local and nationwide minutes for $40 a month, and 2) U-verse Voice 1000, which includes 1,000 Call Anywhere minutes to any location in the U.S. or U.S. territories for $30 a month.

Yahoo and JAJAH announced a partnership where JAJAH will operate Yahoo! Messenger’s VoIP platform. Yahoo! Messenger is Yahoo’s instant messaging (IM) platform, and JAJAH will manage PC-to-phone and phone-to-PC voice calls tied to it. JAJAH will take over the provision of the telephony infrastructure, payment processing, and customer care for Yahoo!'s premium voice users who make and receive voice calls through Yahoo! Messenger. Yahoo! Messenger operates in 200 countries with nearly 97 million users worldwide (comScore, February 2008). JAJAH operates an open source VoIP platform, and currently claims over 10 million users.

Vonage, the VoIP service provider pioneer, has apparently been given a lifeline by some unnamed financiers. Vonage has $253 million in debt due this coming December, and it’s widely believed that it could be a crippling blow to the company if not refinanced. Vonage reports that it has a letter of intent for new private debt financing for $215 million, which should conceivably be enough to allow Vonage to continue as a going concern. Vonage is not completely out of dangerous water yet. Even its own press release says, “The letter of intent is a proposal that will be used as a basis for financing and does not constitute a commitment.” The terms of the debt placement will be under great scrutiny as well. If they are too onereous, Vonage may not be able to effectively operate under them.

Vonage’s fate, whichever way it ends up, will have serious competitive implications. Should it go out of business, there will be over 2.5 million VoIP subscribers up for grabs, along with serious public relations damage to remaining pure play VoIP service providers. Should they remain in business, they will continue to impact the competitive landscape with their assault (albeit less aggressive) on incumbent phone and cable companies, offering a legitimate voice alternative.

Skype announced flat fee unlimited calling plans to 34 countries across the world. Skype claims the new plans reach over a third of the world’s population. Subscribers can select specific countries or regions for the unlimited plans. They can also select all 34 countries to include in the unlimited plan. The plans range from just under $5/month to close to $15/month, depending on which countries/regions are selected. There is no long term contract associated with the plans.

AT&T is expanding wholesale VoIP services by announcing the availability of a Gigabit Ethernet connectivity interface for AT&T Voice over IP Connect Service (AVOICS). Wholesale VoIP providers connect to AVOICS via AT&T's Multiprotocol Label Switching-Private Network Transport (MPLS-PNT) service. AT&T claims the AVOICS connectivity interface enables customers to interconnect with the AT&T network more efficiently, more easily manage their networks and edge equipment and help reduce costs through the use of less expensive interface hardware.