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Summary:

How much worse can things get for competitive voice service providers like Vonage? Quite a bit, especially if you take into account the results of two major cable providers – Comcast and Time Warner – and the recent bundling efforts by Verizon and AT&T. Comcast added […]

How much worse can things get for competitive voice service providers like Vonage? Quite a bit, especially if you take into account the results of two major cable providers – Comcast and Time Warner – and the recent bundling efforts by Verizon and AT&T.

Comcast added 419,000 new voice customers in the fourth quarter 2006, increasing its net adds from the previous quarter. The cable giant ended the year with 1.9 million voice customers. They plan to add another 2.6 million. Time Warner added 211,000 new voice customers in Q4 2006 and now has 1.9 million customers.

Companies like Vonage and Sunrocket have to come up with a different value proposition than just cheap minutes. AT&T Unity and Verizon Freedom are making the price game pretty tough.

In a client advisory, research firm Pike & Fischer reported that the “cable digital phone offerings — when bundled — are within $10 of what the independents are charging. And as VoIP usage continues to expand from early adopters to the mass market, independent providers will be at a fundamental disadvantage, since they cannot guarantee the same reliability and ease of use that a cable company can deliver. “

Sunrocket CEO Lisa Hook told us a while back that the trick is fiscal discipline and introducing value added services. It is OK for a private company like Sunrocket to talk like that, but publicly traded Vonage needs to show growth – lots of it – or get punished even further by the investors.

UBS Research sent out an interesting note this morning which caught our eye. They pointed out that Cablevision, which has 25% market penetration of its voice-ready homes, is beginning to see a slowdown in net additions. If that trend holds for the entire industry, then there might be some hope for the competitive voice service providers.

This will be an interesting thread to follow in coming weeks – Charter, Cablevision, Cox and Vonage are going to report soon.

  1. intresting but not as intresting as a joost invite HINT HINT

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  2. Vonage was a poor bet–for users and their stock-holders–from the git-go.

    Now; as they find themselves even deeper in the communication wasteland that is independent VOIP; the only question left isn’t whether BK is in their future…but when.

    One can only multiply zeros for so long before the money runs out.

    Let the stock-holder lawsuits begin…

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  3. Friday News of Note…

    Here are a few stories that caught my eye as I’m catching up and getting back in the swing of things.A Difficult 2007 for Competitive VoIP?How much worse can things get for competitive voice service providers like Vonage? Quite a bit, especially if yo…

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  4. I’ll probably drop my Vonage subscription as soon as Comcast offers the $99 triple play deal in my area .

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  5. Competitive VoIP CAN Strike Back…

    In a recent post, Om Malik points out that competitive VoIP providers like Vonage and Sunrocket will face difficult times in light of cable operators’ increasing market share and the bundled offers from AT&T and Verizon. But there is a…

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  6. It’s becoming a tired catchphrase, but it’s no less true for its’ repetition: All voice is converging towards free. It’s just another service on your dumb pipe: It makes no more sense to pay a per-voice call charge than it does a per-website visit or a per-email fee. I don’t regard myself as a bleeding edge adopter, but these days about 85% of my calling is on-net (Either Skype or one of the zillion SIP networks that operate here in Oz). It’s a bit cumbersome (Prefix dialling for the SIP network, then the users’ own 86 digit SIP phone number), but I’m viewing that as a temporary aberration.

    I’d say the days of PSTN arbitrage (which is really what the VOIP providers are) are coming to an end. I’m cheering FON and others on too, so that soon enough the days of GSM arbitrage will be over too.

    LG

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  7. Its going to be tough year for VOIP companies, unless they start bundling their services with some other value added applications.

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  8. Sandeep Sahai Friday, February 9, 2007

    I guess and i believe that majority of consumer want to reduce there phone bill. And trend is moving toward VOIP. So just imagine there are 100 million customer and if Vonage is able to tap only 2% percent of that, then Vonage is having 2 million new customer.

    One strength of Vonage is low operating cost then other provider.
    Secondly bundling with other feature is very good suggestion.

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  9. [...] surpassed two million digital voice customers last week, with nearly a quarter of those subscribers activating service in the fourth quarter of 2006 [...]

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