After much speculation, Vonage is finally coming to Canada - joining Primus in the VOIP market. Aside from the intriguing geek factor, the prospects for Vonage and other Internet telephony providers is likely limited north of the border because Canada's residential phone prices are so low. This eliminates the marketing tool Vonage has been leveraging in the U.S. where its prices are about 20% to 30% below incumbent carriers. If, for example, you compare Vonage's prices with Sprint Canada, it's a financial wash if you include a package that includes 200 minutes of long-distance service and three calling features. Until the CRTC does away with the price-cap regime, there will be little wiggle room for VOIP players to gain a foothold.
It should also be noted that Vonage's success in the U.S. should be described as modest with 135,000 subscribers. While it's apparently adding 20,000 customers a month, Vonage is a long way from replicating the subscriber growth of emerging high-tech companies such as NetFlix, Tivo and XM Radio. Vonage's real success is its ability to raise US$105 million of venture capital, which talks to the entrepreneurial skills of founder Jeffrey Citron.