Small Internet phone-calling companies in Colorado are booming, part of a nationwide trend away from traditional phone service.
Golden-based New Global Telecom is one of the fastest-growing – exploding from about 3,000 customers to almost 60,000 in the past year.
“We’re growing like crazy, but we’re really just at the beginning of the growth curve,” said Guy McAree, NGT’s vice president of product marketing. “The market is growing very, very fast.”
Front Range Internet Inc., based in Fort Collins, went from a handful of mostly business Internet call customers a year ago to about 1,200 now, said Bill Ward, company president.
“It’s all brand-new,” he said. “It’s definitely a growth area for everybody.”
A group of about 10 small Colorado providers is helping to drive the growth, according to information from VoIP Review, a Denver-based industry group. (VoIP stands for Voice over Internet Protocol, another way of saying Internet phone service.) Industry leader Vonage and other national companies also serve Colorado.
An estimated 4 million phone customers have switched to Internet phone service nationwide since 2002, when the technology first started attracting customers, analysts say. Projections indicate a jump to 28 million subscribers in the next two years, according to Infonetics, an industry research firm. No exact number of Internet phone customers is available for the state, because it isn’t regulated like other phone service by the Public Utilities Commission.
Most local companies offer flat-rate monthly fees, usually about $25, for unlimited local and long-distance calls made over the Internet. They say customers who switch save up to 50 percent off traditional phone bills.
For Internet phone service to work, customers must have either a high-speed Internet DSL connection or a high-speed cable connection.
Jim Hinsdale, president of Denver-based Live Wire Networks, said most companies have managed to fix technology problems, from voice “echo” on lines, to calls being dropped. Live Wire provides service to 120 small business and residential customers.
Companies also have installed emergency power systems so that Internet phone service won’t be lost if the electricity goes out.
911 has been a concern
One big customer concern has been the inability of 911 emergency calls over the Internet to alert emergency dispatchers to the location of the caller.
Internet addresses don’t necessarily correspond to the place where a subscriber lives as telephone numbers do, said Travis Mitchell, vice president of business development at VoIP Review.
Progress has been made in overcoming that issue since the Federal Communications Commission required Internet phone providers to make sure dispatchers could pinpoint emergency calls.
Other Colorado Internet phone companies seeing fast growth include Falcon Broadband, PSI Broadband and Tellurium, all in Colorado Springs.
Falcon bought the assets of the former SunWest Communications when it went bankrupt in 2004. Jeff Carbo, Falcon’s technical office manager, said the company is growing at a rate of 4 percent per week from its base of 5,000-6,000 customers.
“We’re trying to offer a Vonage type of scenario,” he said.
National Internet call leader Vonage has about 25,000 Colorado subscribers, a spokesman said. It advertises unlimited long-distance and local calls for $24.99.
David Wainwright, PSI Broadband operations manager, said the company doesn’t even have time to market outside its existing customer base, and workers still expect to generate up to 100 new accounts per month. After just four months in business, the company has a little more than 100 customers.
Roger Duncan, chief executive at Tellurium, which has about 1,000 customers, said more people are willing to try Internet phone service.
“It’s a matter of how many people you have on staff and how many people you can talk to every day,” said Duncan.
In the red, but growing
Dramatic customer growth doesn’t necessarily translate into profitability for the Internet phone providers.
For example, USA Today reported that Vonage’s revenues jumped from $18.7 million in 2003 to $174 million for the first nine months of last year. But from January to September 2005, it recorded a loss of $189.5 million, much of it due to marketing costs.
Phone companies such as Qwest, AT&T, Verizon and Bell South are the companies with the most to lose from the growth of Internet phone service.
Jeffrey Halpern, a cable/telecom analyst at Sanford C. Bernstein & Co. in New York, said about 500,000 Qwest customers dropped traditional phone service last year. A similar number could drop this year, and up to 670,000 could switch in 2007, he said.
Qwest has about 15.1 million access line subscribers across its 14-state service area, including Colorado, according to its website.
Qwest also offers residential and business Internet phone calling, but does not release subscriber numbers for competitive reasons, said Carey Madsen, a spokeswoman. However, she said Qwest has about 1.3 million high-speed Internet customers, meaning the possibility for an easy switch to Internet phone service is there.
Cable in the catbird seat
The other providers of Internet phone service are cable companies.
Comcast Corp., which provides service in the Denver area, had more than 8.5 million high-speed Internet subscribers signed up nationwide at the end of 2005.
However, the Philadelphia-based cable provider offers its Digital Voice product over its private network rather than over the Internet.
Comcast expects to add 1 million Digital Voice customers in 2006. The company does not release Colorado-specific numbers, said Cindy Parsons, a spokeswoman.
Staff writer Beth Potter can be reached at 303-820-1503 or bpotter@denverpost.com.
