Pure-Play Providers See Promise And Peril In Vonage Case
By Greg Scoblete -- TWICE, 5/7/2007
NEW YORK — Vonage's high-profile legal battle with Verizon may mean more customers for other pure-play VoIP providers, or it may be a hint of what's to come once they grab enough business to arouse the attention of the big telcos.
"One can never say definitively what will happen," acknowledged Huw Rees, marketing and sales VP, Packet8. "We've been in this business for 20 years and have a lot of IP ourselves — 66 patents, with the last three specifically covering areas where Vonage got into trouble. And we have more [patents] on the way," Rees said.
"There are no guarantees, of course, but we're confident in our position."
"Not all VoIP networks are created equal and what holds for Vonage does not hold for everyone," said a spokesperson for SunRocket.
Since its inception, Vonage has aggressively advertised its service and by extension lifted general awareness of VoIP technology. One lingering question is whether Vonage's public travails will have a ripple effect on the category in general.
"Public perception is important and we need to communicate to potential customers that we are viable," SunRocket's spokesperson said.
There is also an opportunity to capture customers who may be eyeing alternatives now that Vonage's future is cloudier, Rees said.
Vonage is not only the market leader, with roughly 2.3 million subscribers, it is the only pure-play voice service to attract a seven figure user base. The next closest pure play competitors, SunRocket and Packet8, are both below 300,000 subscribers.
Pure play services have been slow to acquire mainstream consumers because they require "a certain amount of knowledge on the part of the consumer" that regular phone service doesn't, said Sally Cohen, analyst, Forrester Research. "With cable VoIP, it's seamless," she said.
"In the near term, pure play will remain a niche, particularly among price conscious consumers," Cohen added. Their future, she added, relies less on legal outcomes but on how they position their offerings.
