Blog Post

SunRocket, Happy To Be Number 2

It should hardly come as a surprise that we remain highly skeptical of the competitive voice service provider business, especially in light of recent shutdowns and overt reliance on discount pricing as a lure for the customers.

It was the same skepticism with which we approached our interview with Lisa Hook, Chief Executive Officer of SunRocket, the Vienna, VA.-based CVSP that has also raised substantial amounts of venture capital investment. Now it is a company that has been put under the microscope by us, and others who have bitterly complained about company’s infrastructure.

Hook, talked to us about her company, and the industry in general, and why she thinks SunRocket is going to be around, despite doubting Thomases. She was quick to point out that the company has grown from 50,000 subscribers at the start of 2006 to over 175,000 subscribers.

“We are taking a long term approach to the market, and are focusing on breaking even,” says Hook, “We are not interested in growth at any cost.” It was a subtle swipe at folks like Vonage, which are spending millions on marketing.

She believes that Vonage’s madcap spending is actually helping SunRocket, because it is creating a barrier to entry for smaller players. She acknowledged that there is no barrier to entry from technical standpoint, and the only barrier is capital.

“Why do we have to be number one? We are happy being number two to Vonage,” says Hook, and explains why. In the US, the Baby Bells and cable companies are the two incumbents, with Vonage as the third “voice” option. Cable operators, for instance are bundling their voice service at about $35-to-$40 a month, while Vonage and SunRocket compete on price.

Hook argues that cable operators have decent margins on their voice business, which allows them to maintain their current market capitalization. If they cut the prices too much, their EBIDTA will decline, and the stock markets would put pressure on their market capitalization. “They are not dropping prices anytime soon,” she says, which means that if you have enough fiscal discipline, keep your customer acquisition costs in check, you can survive in this cut throat business.

She argues that the numbers are big enough for SunRocket to build a big business. There are between six-to-10 million phone lines up for grabs every year, and Cable operators can easily take half of that market. It still leaves enough for the likes of SunRocket, she argues. “We have to focus on getting cash flow positive,” she says, “And then offer more than just cut rate voice service.”

SunRocket is planning on offering new devices including phones that will allow it to offer value added services including contact management, presence and find-me, follow-me type features. More than that, the company needs to address its biggest problem: poor after sales service.

Hook acknowledges that has been a problem in the past, and the company is working hard to rectify those issues. Hook says the company has a new billing system, a new ATA vendor (Linksys) and is spending on Network to address the customer complaints. “We have moved our customer care back to US from Philippines,” she says, “And we are spending a lot of time in Missouri to keep improving it.”

So while these are all encouraging steps by the company, and good arguments by Hook, we shall watch their progress closely, before being completely convinced of their chances.

10 Responses to “SunRocket, Happy To Be Number 2”

  1. Just Googled Lisa Hook ex-CEO of SunRocket now defunct; her career must be some kind of textbook example of how the minimally competent are able to thrive in a good-old-boys type network. She started as a lawyer, “served” in the FCC 2 years during the Raygun administration, presumably giving her valuable political connections. At Elsivier she was named to the “Remuneration Committee”, being, one might assume, quite concerned with money. She befriended someone at AOL but helped blow their entry into broadband, yet still was hired to head SunRocket. As she had questionable skills, one might reasonably suspect the venture capitalists behind the firm might have been using her as a tool to help yank the plug at SunRocket, or at least leave her holding the bag? Who knows.

    Who says regulating business is a waste of time, particularly since this seems to be yet another example of the malfeasance that seems to be second nature to a whole raft of corporate movers and shakers, who seem to move and shake purely to enrich themselves and their buddies, the public be damned. And, because of bankruptcy productions, they’ll end up keeping most of their ill-gotten gains, while 200,000 former customers are burned.

  2. I’ve been talking for free on SunRocket now for over 2 months already. It’s awsome. Got another 6 months of free time to go. Want to know the secret? I sign up through for a $80 rebate on Sunrocket.

  3. I am also a new and very satisfied SunRocket user. Installation and setup only took a few minutes. My time spent with customer service before and after activation were excellent. They even sent me a free phone because I did not already own one (I have been exclusively mobile for five years).

    Your article states that “SunRocket is planning on offering new devices including phones that will allow it to offer value added services including contact management, presence and find-me, follow-me type features.” I don’t know when you got that from SunRocket, but I already have all of those services.

    And yes, when I decided to go VoIP, I did consciously choose SunRocket over Skype because my experience with Skype has been very negative. I only know one other person with a VoIP phone but it is difficult to talk to him due to poor signal — he’s on Vonage. But every other call, landline or mobile, is clear as a bell.

  4. Joe Sauer

    We’ve been using SunRocket for 7 or 8 months now and have been very pleased. We’ve had 2-3 service interruptions – but the first two times we called customer service and had fast and accurate advice to get us back up in no time. The last time we knew to start by rebooting the Gizmo and didn’t need to call customer service. Excellent sound quality, great feature set.

  5. Unfortunately my experience with SunRocket was not so good. I was never able to get the service working and spent approximately 6-8 hours on the phone with tech support. Their only solution was to escalate my issues to the Network Engineers who never called me or follwoed up.

    After 6 weeks I gave up and called to get a refund. At least they processed the refund efficiently.

    This happened 7 months ago.

  6. I am a proud user of SunRocket for the last 4 months and have never experienced any problems. Their service is always great and the voice clarity is commedable. I am happy to see that they have their focus set on serving existing customers and becoming cash flow positive instead of spending endless millions in trying to acquire new customers. Though eventually, they will have to come up with the key differentiators to survive in this industry. Who knows, the way they are going, the key differentiator might be customer service.

  7. Om,
    Been following your posts on VoIP providers with interest for quite a while; and one thing I’m curious about is the effect of Skype on these guys, which no one seems to talk about. Surely the SkypeOut/SkypeIn and the hardware ecosystem that seems to be building up around Skype might be affecting these players significantly? Thanks!