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VoIP upstart Vonage is opening shop in Canada - its first foray outside the US. Canadian customers will be billed in Canadian dollars and can choose local telephone numbers.

VoIP, or broadband phone service as Vonage styles it, uses DSL web connections to route phone calls at much cheaper prices than thos of the traditional telco. The service uses Motorola VT1005v handsets.

Jeffrey Citron, chief executive at Vonage, said that Canadian consumers had been asking for the service: "Vonage has once again responded to strong demand for choice."

Fees start at $C19.99 for 500 minutes a month. For $C45.99 subscribers get unlimited calls in Canada and the US. International rates are also low with most countries costing less than 20c a minute. Services in the US start at $14.99.

Vonage is planning a European launch at the end of the year, kicking off with the UK and Switzerland. In the US, the company has early-mover advantage, but in Europe, the incumbents are set to have this slot. Vonage also faces a left-field challenge from Skype, which has gained millions of users in a few short months, thanks to the distribution of software which enables users to make free P2P calls using their broadband connections.

VoIP services will take a big slice of revenue from the traditional telcos, once the regulatory issues are sorted. But who will be the winners? The incumbents are not going to let upstart start-ups destroy their businesses. In the UK last month, BT set up VoIP packages for consumers; and in the US, AT&T, QWest and Level 3 are promoting their own residential VoIP services. Vonage is suing AT&T, accusing the telco giant of brand confusion over its service CallVantage. ®

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