(update – Reuters is reporting that Vonage won a temporary reprieve from an appeals court on Friday, hours after a lower court barred it from adding new customers while it appeals a finding it infringed Verizon Communications Inc. patents for making phone calls over the Internet.
If you’re a Vonage customer – you have nothing to worry about – right now. If you are not a Vonage customer you can’t sign up for new service (at this time). Why? Vonage lost a court battle with Verizon that it (Vonage) infringes on Verizon patents.
What will happen next?
If Vonage does not pay royalties to Verizon or come up with a work around or some other solution – it’s done.
What are you going to?
I’d highly suggest you get in place an option for an alternative phone service. It’s not hard, unless many people have your Vonage number.
I would suggest you do a few things?
1. Email and post on your web site an alternative number customers and others should use IF they should fine your Vonage number not working.
2. Research and check up on what other service you could use in case Vonage service is cut off. I would assume you’ll get some warning.
Crain’s writes about the “no new customer” ruling here and Business Week writes about it here.
On it’s web site the sing up form is still there…maybe it’ll be taken down later or there’s more recent news.
Even if Vonage somehow wins all of their appeals, they’re still losing money hand-over-fist. At $24.99/month, a year’s revenue per customer (before int’l calls) is $299.88. Their customer acquisition cost is closer to $400. Factor in their non-marketing operating costs, and their time to break-even is way too long (and with their churn rate, there are many customers who leave before being profitable). In 2006, they lost $286 Million. They currently have about $500 Million in cash. At last year’s “burn” rate, that gives them less than 2 years. Nearly 2 weeks ago, before the ruling, I predicted in a telecom-related email discussion group that Vonage would be dead by the end of 2009. I may have been too optimistic.
Yosef Rabinowitz, Managing Director
TBRC Cost Recovery, LLC
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