Vonage Holdings Corp., aNew Jerseycompany that leads the U.S. internet telephone market withmore than 1.6 million customers, is set to go public Wednesday.

It is expected to raise at least $500 million US, selling 31.3 million shares for $16 US to $18 US each, the company's prospectus says.

Internet telephony, known as Voice over Internet Protocol, is seen as the next wave in the phone business. Cable companies, Vonage Canada and smaller providers are offering the service in Canada in competition with traditional and VoIPphone services offered by companies like Telus and Bell Canada.

Vonage's Canadian service, launched in 2004 is small, but growing quickly. Canadian revenue in 2005 was $7.6 million US, out of total Vonage revenue of nearly $270 million US. But in the first quarter of this year alone, the Canadian operation took in$4.3 million US.

Vonage is already irritating big companies like Shaw Cablesystems. Vonage Canada recently complained about a $10 "quality of service enhancement" fee Shaw charges customers if they use a VoIP service.

The Vonage prospectus says Shaw has gone to court in Calgary, alleging that statements attributed to Vonage Canada regarding Shaw's fee"are false, misleading and defamatory and have interfered with Shaw's relations with its customers." Vonage says Shaw's claim is without merit and it will fight.

Most of Vonage's sales are made direct to consumers, but the prospectus says sales through retailers are increasing, and it has recently added a string of Canadian chains — London Drugs, Best Buy/Future Shop, Office Depot, andCompuSmart — to earlier chains that had sold the service, The Source by Circuit City and Staples Business Depot.

The U.S. company emphasizes its relatively low fixed monthly fees, cheap long-distance rates and the kinds of services offered by traditional phone companies, such as call waiting andcaller ID.

U.S. analysts are monitoring Vonage to see how its does against the much bigger cable companies. The cable arm of the Time Warner conglomerate has 1.4 million subscribers for its VoIP service.

In Canada, the federal cabinet recently asked the telephone regulator to reconsider its ruling which put rules on big phone companies that don't apply to other VoIP competitors.