Blog Post

Vonage ready to rumble

You know things are getting pretty grim when even we start having sympathetic thoughts for Vonage, the residential VoIP service provider that got KO-ed by Judge Hilton who gave the company two weeks to stop infringing on Verizon’s patents.

Today the company is getting hit by a class action suit that alleges that Vonage over promised and under-delivered on its VoIP service. On its legal troubles with Verizon, the company issued a press release, promising to soldier on, and fight Verizon in the courts.

“Friday’s events represented one small step in what is sure to be a long legal battle. The fact is we’ve been preparing for this verdict and the possibility of an injunction for months. Anyone who’s counting Vonage out is making a huge mistake.” Mike Snyder, Vonage’s chief executive officer.

These are three likely scenarios facing Vonage.

  1. If Judge Hilton grants a stay, then Vonage can continue operating and will have to pay royalties on an ongoing basis.
  2. If no stay is granted, then Vonage will seek a stay from the appeals court.
  3. If Vonage fails to get a stay from either of the two courts, then it will have to develop a work around, which is not that far off in the future, and thus avoid any shut down of the service.

Whatever the outcome, Vonage’s financials are going to take a hit. Furthermore, the Vonage decision will basically tip the balance of VoIP power in favor of cable operators who are watching this legal drama with the same attention Lost gets from television junkies.

18 Responses to “Vonage ready to rumble”

  1. Jesse Kopelman

    Carl, that is exactly why it makes sense for Qwest to be the buyer. The Vonage brand has no value to AT&T, Verizon, Time Warner, or Comcast, but it does to Qwest, which is largely unknown on the East Coast and poorly regarded elsewhere.

  2. Well, we’re probably all lucky that we can’t (yet) smell things through our computers, phones, etc…’cause if we could, that would be the smell of death ticklin’ our nostrils right about now…

    …as for who might buy this cash-bleeding animal; given the 2,000 VoIP patents Om says are out there; only one of the well-capitalized players who already hold a large share of such IP assets (to fight and negotiate with the other VoIP IP leaders) should dare do so…unless, that is, they don’t mind finding themselves the proud owner of…another SueTube.

  3. Dexter M

    As a long time VOIP person and on and off vonage customer. I would be glad to see vonage go. Vonage (like all large corps) is fine untill you have a problem. THem the resolution of it is horrible. IF there is one less vendor of voip in the world, so be it. VOIP should have stayed a tech wonder for those who understand it, rather then trying to become something grandma can use.

    Oddly enough, Vonage is probebly the best there is, cept that their licencing agreements have locked up all the good voip hardware. So if they go, oh well. They should have played nice with customers in the beginning – they would get some sympathy.

  4. Cablecos are certainly not in any better position if the Verizon patent claims hold up under appeal. The claims are so broad and general, they essentially apply to anyone doing VoIP. Heck, there are even claims for a cordless/wireless VoIP phone. Verizon has basically taken common telephony/computing artifacts, attached VoIP to them, and called them something new.

    As much as we love to hate Vonage because of their arrogance, stupidity, poor customer service, etc., it’s undeniable that they helped in a major way to usher in a new communications era that has resulted in expanded consumer choice for phone service. If Verizon has their way and goes after all VoIP providers, there could be a reversal of all that with the power going right back to the big players.

  5. Stan Miller

    I hope Vonage makes it. More competition in voice is a good thing.

    I’m a Packet8 user at home. Their QOS service is iffy at times, but it still works good enough and it’s saving our family a bundle.

  6. Maybe there is also the possibility of some fair use. Take unfair competition, the necessity of standards, some pints of unjust enrichment et voila: option 1 above. Vonage did take only an element of Verizons technology, property right or not, lets imagine Vonage did at least that, and did create something new, a completely new product, thing. IP in a networked environement where everything depends on the other is special.

    Sort of an analogy would be to use a short Michael Jackson sample in a new summer hit. This new summer hit, Kiss me baby or whatever, would be something new. Allthough it would have its special fun from the Michael Jackson sample, he would not be able to destroy it, but they would have to pay, maybe one cent pro sale.

  7. Om, look at the numbers, they are currently at a market cap of about $250- $300 a sub. Definitely a fair price!
    Methinks that buyers are waiting in the wings to scoop them up after they fall a couple of more times.
    A smart buyer would stop the crazy advertising expense of $1m a day and he then have a very profitable company, I calculated Vonage profits per customer a year are Gross Profit = $203.85!
    If you want to see my calculations go to

  8. Strikes me that Vonage has done everything wrong when it comes to building the public support it now needs. Everyone loves an underdog fighting against the incumbent “man”, but with its dreadful customer service and denial of QoS issues Vonage has managed to become the underdog everyone loves to hate.

  9. Om, What makes you think Cableco’s in any better position than vonage regarding VoIP patents? Vonage uses the same off-the-shelf equipment and open standards as everyone else – Cable, other independents. Patents will prove a quagmire for everyone.

  10. Vonage should already have had a contingency plan solution for option 3.

    Just shows the stupidity + lame arrogance of the Vonage executive management.