Vonage Shifts Tactics

In its efforts to control marketing cost, Vonage has been targeting geographic regions where it has a greater chance of signing up customers with high need to call international destinations. For the most part that means urban areas with large immigrant populations.

So although Vonage's marketing up to this point has been able replacing other landline services, the new value pitch is more nearly the "cheaper long distance" segment whose buyers might otherwise be looking at calling cards, dial-around or other ways of calling globally for less money.

The move highlights a perhaps under-appreciated aspect of the voice communications business. Though most executives think "voice is a commodity," and are right in most respects, an argument can be made that voice is not actually a "commodity" in a classic set, but rather a set of "commodities," or perhaps not a classic commodity at all.

Sugar, salt and flour generally are classic commodities. But sugar is not a substitute for salt or flour. In that sense, mobile communications is not generally a substitute for landline voice, a business phone system, PC-to-PC communications or texting, though in some ways each of these modes is partially a substitute for each of the others.

Even email, surely something most people would say is a commodity, is not completely so. Mobile email is a different product than Gmail, or else everybody would be using mobile email. The point is that the mode of consumption, the cost of consumption, the places and time where consumption occurs, as well as the essential required features for successful use, are not so substitutable as to make all of them fully interchangeable commodities.

And the point of that observation is that industry proponents sometimes do not work hard enough at understanding the real differences that make each of these modes and use cases "different products." Which is to say, no commonly interchangeable commodities.

The point at hand is Vonage's new marketing pitch. True, for some users Vonage is a substitute for legacy wired voice service. For others, it is a substitute for long distance calling, calling cards, callback service or dial-around.

To say voice is a scale or volume business, a low-margin business or even a "bulk" business is one thing. To say it is a "commodity" business might be more correct within a single segment or use case. It is wildly incorrect across the full range of use cases that "voice" now represents.

Some might point out that short message service (text messaging) is a distinct business. Others will say it is part of the mobile voice business. Some might say it sometimes is part of the mobile business, and sometimes a "PC-initiated" and "mobile terminated" business.

If such opinions can exist, it is confirmation of the "non-commodity" (in the sense of non-interchangeability) nature of the business.

That isn't to say differentiate is easy. It is hard. But to argue it cannot be done, because voice is a commodity, is off the mark. That isn't to say it is easy to differentiate without obtaining scale. Providers might rationally choose not to differentiate. But that is different from arguing "they cannot."