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Vonage: Verizon Merely A Flesh Wound

Couple of items to report on the Vonage front. First, the company has quietly announced its first annual calling plan.

It’s been offered only to existing residential customers, according to a company spokesman. It will cost $239.99 for a year’s worth of unlimited calling in the U.S., Canada, Puerto Rico and certain European countries. It would save subscribers about $60 a year vs. paying $24.99 a month.

The spokesman described the plan as in “beta” with Vonage testing the response from its customers before deciding whether to roll it out to new subscribers.

Vonage also fired back at unnamed “media” outlets for speculating that the company’s patent imbroglio with Verizon will spell the end of the startup. According to a company release:

“It is wrong and irresponsible to presuppose either the outcome or the impact this litigation would have on our business,” said Mike Snyder, Vonage’s chief executive officer. “First and foremost, we are confident we have not infringed on any of Verizon’s patents and, in any case, we believe the Verizon patents are invalid.”

Snyder continued, “Nevertheless, our financial reserves would allow us to continue normal operations regardless of the outcome. In addition, we are confident that regardless of how this litigation is ultimately decided, Vonage’s customers will see no change whatsoever to any aspect of their phone service.”

Vonage intends to vigorously fight this frivolous lawsuit and expects to win. The company is confident it will be vindicated and, in the process, Verizon’s lawsuit will be exposed as a transparent attempt to stifle one of its most successful competitors.

As the leading provider of broadband telephone services in theU.S.and based on Vonage’s current financial position it is well positioned for future growth and success. Vonage’s accomplishments in the past year continue to validate our business strategy and the strength of the company. These include:

 -- 19 consecutive quarters of double digit revenue growth; 
 -- Doubled revenues to $607 million in 2006 alone; and 
 -- Adding nearly 1 million net subscribers and growing. 

The conventional wisdom has it that startups like Vonage and 8×8 and SunRocket, et. al. are doomed by the rise of cable-delivered telephony and possibly even Skype and other IM-type offerings. This Verizon suit plays into that narrative. But prior to CES I spoke with Stephan Beckert, an analyst at TeleGeography who said that in fact, Vonage and other independent providers could secure about 40 percent of the market by 2010, and that a 60-40 split between cable/teleco VoIP and independents will be the natural equilibrium of the market.

That’s probably about 4 million-7 million subscribers for the independents by 2010 based on the figures floating around.

In this analysis, there’s room for Vonage and other players, if they can remain financially viable. Stay tuned.