Voice over IP (VoIP) start-up economics continue to defy gravity. Launched in June and targeting the developing world, Fusion Telecommunications International Inc’s Efonica VoIP service reports it has now signed up 750,000 subscribers in more than 100 countries. Using a patent-pending worldwide Internet area code, members of this merry band are able to speak to one another for free.  Where the money is coming from is in up-selling premium services – so far to a less-than-hold-the-front-page 10,000 paying punters.

Fusion executives appear upbeat with these numbers. “Since our launch in June, the majority of our efforts centred around enhancing our free Efonica service offerings,” according to Roger Karam, president of Fusion's VoIP Division. “We are now focused on introducing additional premium services in the near term and driving revenue growth through up-selling existing customers and marketing our services through our growing number of retail distribution partners worldwide.”

Although a somewhat different VoIP beast, low-cost and free-ish Vonage Holdings also appears upbeat with its latest numbers. In its Q3 2006 results the company reports revenue more than doubling to US$161mn from a year ago, and GAAP net loss shrinking year-over-year to a mere US$62mn, down from US$74mn in Q2 2006 and from US$66mn last year. Somewhat less good, as highlighted by business analysts, is that average monthly churn was up to 2.6%, an increase on the 2.3% in both Q2 2006 and the year-ago quarter. Overall growth was slowing – the company lowered its forecast for net new additions in 2006 – and the cost of acquiring new users increased - marketing costs per gross subscriber line addition were US$254 for Q3 2006, an increase of 6% from Q2. The Vonage closing share price yesterday was US$6.50, down from US$17.00 at issue (click).

We think: freebie-geebies.
John Williamson