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Thursday, March 13, 2008

VoIP loses another Ad-VON-t-AGE

With a rising number of VoIP providers in the industry, using the law to cut your competitors down to size seems to be the order of the day. The latest in the list of major VoIP companies that were sued are Skype and Vonage.

While Skype’s litigation is still being resolved, Vonage is one brand that has received a severe beat-down on its reputation as a service provider. More recently, it settled a lawsuit against Nortel, allowing for cross licensing of their technology. While this did not call for payment by any organization, 2007 was a relatively bad year for Vonage. AT&T, Sprint and Verizon, three major competitors in the VoIP arena, filed lawsuits regarding patent-infringement against them, which resulted in an astounding figure of $239 million to be paid by the company. Adding to the damage is the recent news that Vonage had tried to lobby the federal government, also in 2007, and spent nearly $1.4 million in the process, according to a disclosure form by the Senate’s public record office which was posted online on Feb. 13th 2008 (as per Associated Press).

Vonage was one of the first providers of VoIP back in 2001 when it was started. Its user base grew to about 1 million till 2005, but constant customer complaints and four lawsuits brought the company down in 2007. According to Patrick Monaghan, a Yankee Group analyst, Vonage’s biggest challenge is going to be countering the rising debts, which would amount to $253 million in obligations that come due in December, 2008. While this is a very big loan to pay off, the bad news apparently is far from over for Vonage. Customer volumes are also rapidly declining. While about 300,000 subscribers were added on in the third quarter of 2007, 222,215 users were lost in the same time-span, resulting in an effective addition of only 77,785, according to Monaghan. Further, trying to cancel Vonage’s services is a tedious process and can cost as much as $40. Also, transferring a Vonage phone number to a normal land-line takes 10 days, and often doesn’t work for many users. Telephone companies have also brought sufficient competition to Vonage with their own offerings having unlimited long-distance plans. As they can add satellite TV, phone and DVR services to make their product seem the better one, Vonage is clearly walking on thin ice. Quality issues also persist with voice quality dipping when users play games online. Though Vonage has assured its customers that such problems would be resolved very soon, it is not going down well with the masses.

With the US market reaching a saturation point in terms of connectivity, the future for Vonage clearly lies in the international market. However, considering the present circumstances of the industry as a whole, clearly there is a need of either a serious facelift in the interfaces of the current VoIP providers, or maybe the time has come for new players to enter into the market and provide consumers with a better voice quality and connectivity features. Measures like these are very essential, if VoIP is to expand its avenues and further grow as the new means to communicate.

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