Some Vonage Thoughts

by James Gaskin

After meeting multiple Vonage employees during my research for my consumer VoIP book, I feel I have a decent grasp on the company culture. That culture strongly echoes Jeffrey Citron, the now ex-CEO and new Chairman and Chief Strategist. Make no mistake – Citron is a sales guy, a high-end sales guy who collects large sums of money wherever he goes. The move from CEO was a bone thrown to the SEC for restrictions placed on Citron from an earlier company (Citron paid a $22.5 million dollar fine but admitted no wrong doing). Call him by whatever title you want, but he will continue to be a sales guy.

I expected Vonage to be sold or go public this year, because they've already burned through $600 million in venture capital funding, and investors want some return. Frankly, I expected someone to buy Vonage, but I bet the growth in phone service from cable companies scared off buyers. Read about the IPO here.

Leading the market now with about 1.4 million subscribers, Vonage faces strong growth pressure from cable companies bundling phone service with TV and Internet access. There's always a chance the FCC will allow cable companies to "shape traffic" to support their own services, which will degrade the service of companies like Vonage that don't have their own networks. Look for more lawyers to start making even more money, much of it from lobbyists, over the next two years.

Vonage proved the market for telephone-centric consumer VoIP existed, and they retain leadership of that market. But Super Bowl ads are an expensive way to get new customers, and the IPO will supposedly go mostly to marketing. So it appears Vonage has not changed their tactics over the past few years. This means the changing market may cause them more trouble than they expect.

4 Comments

Alok
2006-03-04 03:17:38
Just came accross this post quoting Vonage subscriber numbers and wanted to offer a correction. The 1.4 million number is actually the number of subscriber lines, not subscribers. Vonage is a bit cagey with actual customer numbers, I suspect because it doesn't want to draw undue attention to metrics that don't suit it's pre-IPO agendat. I don't recall the exact presentation, but on the last day of the O'Reilly eTel conference a presenter put up some interesting figures.


As of Feb/06:
- Vonage subscribers = 1.1 million
- Rotary Telephones in the US = 1.2 million


Who was it that said, "The future is already here, it's just not evenly distributed yet"


James Gaskin
2006-03-04 07:03:58
That's a great quote, thanks.


I'm not sure about the numbers and if they make a real difference. Sometimes companies quote subscribers, but revenue only comes from active lines. I would think active lines is a better market share number than subscribers.


James

Kenneth Casner
2006-04-03 17:13:10
A new wrinkle in Vonage (dis)service. If you choose to leave (escape)from your VoIP be ready to be the victim of the latest problem..."They can't get you, sorry your phone is no longer in service". That's right, once you leave Vonage (and possibly other VoIPs) you probably can't be reached by your former co-subscribers.


Vonage will take you out of their active database (the one that controls their entire network). So, if a Vonage user tries to call your number (now back on your local Bell or other LEC) they get a message..."...the number you called is not in service...".


Surprise? Not really, it took a friend over a month to get his original business related number back. Now he can't get calls from other Vonage customers. Does this sound like the start of a Class Action Suit? or what?

James Gaskin
2006-04-03 19:05:16
Have your friend get in touch with me and send me details, and I'll contact Vonage to get to the bottom of the story. If they've done something underhanded, I'll write plenty about it. If you or your friend don't provide some evidence, I'll delete your posting as unfounded.


James