Will Vonage Holdings be the next hot IPO? Yesterday's Wall Street Journal reported that the popular company is looking to go public in a deal to raise $600 million. Specializing in voice over Internet protocol -- or VoIP -- the company has a clear allure.

Most of the roughly 800,000 active Vonage lines pay $24.99 a month for unlimited telephone service throughout the United States and Canada. Relying on your broadband Internet hookup, instead of the traditional land-line connection, the company is able to deliver calls cheaply.

How does it work? Easy. A Vonage phone adapter is connected to your speedy online connection. When you make a call, it gets routed over the Internet to one of the approximately 2,000 active data centers in more than 150 different countries. This isn't like the similarly popular Skype software, which allows folks who are online to place free phone calls to others who happen to be online at the same time. Real phones come into play here, and that's what has spooked the already struggling telecommunication providers.

AT&T's (NYSE:T) CallVantage was one of the first to challenge Vonage, though now it seems as if the VoIP list is endless, with companies including Comcast (NASDAQ:CMCSA), Verizon (NYSE:VZ), and Motley Fool Stock Advisor selection SBC (NYSE:SBC) pitching their own platforms.

One problem is that few are willing to fight Vonage on price. Another problem is that the rivals depend on either the DSL or cable modem that they are championing while Vonage is access-agnostic. The biggest problem for competitors, though, is that Vonage is getting too big, too quick, for them to formulate the appropriate response.

Quarter Active Vonage Lines
Q1 2003 18,000
Q2 2003 39,000
Q3 2003 54,000
Q4 2003 86,000
Q1 2004 131,000
Q2 2004 194,000
Q3 2004 276,000
Q4 2004 388,000
Source: UBS Securities

Looks good? You bet. And the active lines have already more than doubled so far this year.

UBS Securities estimates that the telephony services market will have 13.6 million lines come 2008. Vonage should be good for 3.5 million of those lines. Halpern Capital is even more optimistic about VoIP, pegging the entire market to soar to as many 16 million lines by 2008.

After raising $408 million in venture capital funding, going public was the next logical step. If the company does officially file, it will be interesting to see what its finances look like -- and where it sees itself in the future.

Earlier this month, in a special report that written for subscribers of our Rule Breakers newsletter service, we discussed a few compelling companies that may very well go public come 2006. Will Vonage be the great IPO of 2006, or will a hot market have it going public even earlier? It will be Vonage's call to make -- and we already know that Vonage loves making calls.

Longtime Fool contributor Rick Munarriz is not a Vonage user, though he's been impressed with the company and its two top executives. He does not own shares in any of the companies mentioned in this article. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.