14 Comments

Summary:

After a really rough 2007, Vonage (VG), the independent voice-over-IP service provider, seems to be having a better 2008. This morning the company reported its first-quarter 2008 financial results, and well, things are not bad. Not spectacular, but not bad, either. More importantly, the company announced […]

After a really rough 2007, Vonage (VG), the independent voice-over-IP service provider, seems to be having a better 2008. This morning the company reported its first-quarter 2008 financial results, and well, things are not bad. Not spectacular, but not bad, either.

More importantly, the company announced plans to sell Covad DSL services, rebranded as Vonage Broadband and tightly coupled with its VoIP service.

Revenues increased sequentially by 4 percent to $225 million, thanks to an increase in the number of subscribers (30,000, bringing the total up to 2.6 million) and average revenue per user to $27.85, up from $27.42 sequentially. The net loss for the quarter was about $9 million, or 6 cents a share. The only bad news: Average monthly customer churn increased to 3.3 percent in the first quarter of 2008 from 3 percent in the fourth quarter of 2007.

More importantly, the company is looking to diversify its business, and today said it’s going to start selling broadband service. It has formed a partnership with Covad, which is going to provide the DSL pipes for the new Vonage Broadband service, which will be available to both residential and small business customers. The company expects the new service to be available by the end of the year.

This is a smart, strategic move by the company, which has been punched silly by the incumbents. I’m surprised it took them so long. I think this helps Vonage overcome all the problems created by broadband providers and their networks. Now the big question is: Will consumers buy DSL service from a company with a checkered record when it comes to service and customer satisfaction?

Disclosure: Covad is a sponsor of GigaOM.

  1. Would this relationship with Covad now allow Vonage to guarantee a certain quality of service for phone calls?

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  2. If it were not for the frivolous lawsuits by Verizon and others trying to strangle with stupid patents, Vonage would have earned even more. If they offer good broad band speeds, many will switch in a hurry.

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  3. @ Brian,

    I am betting that is indeed their motivation. I think it is the right approach to take.

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  4. Vonage needs to do something legal for a change!

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  5. Tom Coseven Thursday, May 8, 2008

    How’s Earthlink doing reselling broadband? Why do think this FVNO will turn out any better than the recent MVNO flame outs? Wouldn’t Vonage be better off to start with a simpler QoS deal with Covad, that didn’t require Vonage to bill and support low-margin dsl service?

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  6. A resale (Covad) of a resale (incumbent copper)? Seems like a low margin endeavor fraught with service quality issues.

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  7. Maybe Vonage could be the first company to be allowed to resell Covad business voice?

    Heh

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  8. Andrew Norton Thursday, May 8, 2008

    Covad is a horrible service provider coupled with Vonage is it a marriage made in hell.

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  9. @ Andrew…. Ouch.

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  10. @ Tom and @Partike,

    While I agree with you, I think this is a good move for Vonage needs to shore up its customer base. The subscriber base is going to plateau. the new additions are slowing down. Maybe DSL helps convince others to sign-up?

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