Net2Phone Shifts from Free to Fee


After offering free service to trial users in Puerto Rico for several months, Internet telephony provider Net2Phone Inc. has just sent out its first two sets of bills — and is finding that the switch from free to fee is not driving customers away.

Net2Phone's first deployment — and an all-important demonstration project — is with Liberty Cable in Puerto Rico. Owned by Net2Phone investor Liberty Media, the MSO started a free trial of Internet telephony service in July, with about 200 customers now connected. In January the service went to a pay format.

Net2Phone offered two residential plans through Liberty Cable. One was a basic service offering local calling and voice features for $19.95 per month, plus metered long-distance calling in Puerto Rico and the United States. Its second offering, the "Celebrity" plan, consists of unlimited local calling and voice features plus four hours of Puerto Rico and U.S. calling, for $39.95.

With two months of billing complete, basic users are generating an average $38 per month, while the Celebrity customers are paying about $59 monthly, according to Mike Pastor, Net2Phone's vice president of cable technology.

Traffic balancing

Net2Phone has also seen some interesting usage patterns emerge, Pastor said. For example, during the free trial period, the lion's share of calls were outbound, indicating customers were just taking advantage of free long-distance service. But with service now paid, more inbound calls are flowing across the network, indicating customers are handing out their Net2Phone number to friends and family.

"We are now seeing approaching 35 percent of all calls being inbound calls, and we think that is very telling of a primary-esque type service," Pastor said.

When the service was free, the average customer's call usage was between 700 and 800 minutes. While that did drop to 400 minutes during the first billed month, in February it had climbed to 550 minutes, and through the first part of March Net2Phone is seeing average usage back up in the 700 to 800 minute range, Pastor said.

"That is right in line with what you would see from a residential service from RBOCs," he noted. "So all of these usage characteristics are right in line with your residential phone service that you would get from your incumbent today."