Best Buy to Market Phone Power VoIP Service

Since 2005 a small Los Angeles-based VoIP provider has been taking determined steps to carve out for itself a substantial position among residential and business users. Now it is picking up the pace.

Phone Power isn’t giving out specific numbers, but President Jim Murphy said the company’s user base, now under 100,000 active users, will top the 100k mark by the end of 2010.

That growth spurt will no doubt get a big boost from the just-announced deal between Phone Power and mega electronics retailer Best Buy. The retailer is giving nationwide distribution to Phone Power, with product already on the shelves.

Previously, Phone Power has relied on orders coming in through its web site and call center. With direct outlets to countless consumers, “the Best Buy deal allows us to put ourselves into a different position,” Murphy said.

The deal with Best Buy extends a growth strategy that has been playing out on multiple fronts in the years since Phone Power went live.

Most significantly, the company undertook two acquisitions earlier this year. It purchased VoIP service provider Voiceral and also acquired the residential VoIP subscriber base of Broadvox. Murphy described these acquisitions as part of a larger strategic shift not just within his company but throughout VoIP as a whole.

“We see that the number of small VoIP providers is going to shrink tremendously in the coming year,” he said. “A lot of this industry is a numbers game—you’ve got to get to a certain size to achieve and maintain success—and we see the number of players dropping significantly as people get to a certain size and then just spin their wheels.”

While the acquisitions help to Phone Power maintain its momentum, the company has also evolved a thoughtful philosophy about how to address the practical needs of the VoIP market on a day-to-day basis.

Phone Power Adapter Set
The Phone Power Adapter Set

Rule #1: Vonage is not the competition. As things stand today smaller VoIP players are not likely to strip business away from the bigger VoIP fish. The real target here is traditional telephony. As Murphy notes, some 95 percent of his new customers are coming from traditional landlines. “All of us VoIP players are nipping at the larger whales of the traditional phone service, and there are a lot of customers to go around.”

In that battle, smaller player like Phone Power holds certain crucial weapons in its arsenal.

First comes price. Phone Power gets $19.95 per month with no contract, $16.95 with a one-year and $14.95 for a two-year contract, the latter being the most popular. The price buys unlimited calling within the U.S. and Canada and 60 international minutes in 88 countries. There are also business and hosted PBX packages in a range of prices.

The Best Buy offering includes a two-line home adapter as well as a USB travel adapter. It sells for $79.95, and comes with a $79.95 instant service credit to be applied when the customer activates service on an eligible one or two year service plan.

Murphy also is joining with his VoIP peers in marketing the virtues of functionality, including call waiting, caller ID, call forwarding, conferencing, find-me-follow-me, voice-mail-to-e-mail, and other tools.

While price and features may be practical means of competing with the traditional carriers (or LECs), Murphy says it is the intangible element that may carry the day in the long run.

“The other piece is customer service. I don’t think the LECs are winning any hearts and minds with their customer service,” he said.

How to lead on the service front? “It comes down to company cultures. If you are a LEC and in 100 years you have not had any competition, you are not going to have that culture of customer service,” Murphy said.

A start-up is just naturally going to want it more. With 30 percent of its new business coming through referrals, Murphy said, Phone Power has every reason to want to keep its customers happy. In fact, a number of reviews and user comments have singled out the company for its call quality and responsive customer service.

For a small company taking small steps, the next year may tell whether a deal with Best Buy will represent the first giant step.

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