Vonage Left for Dead?

Rich Tehrani : Communications and Technology Blog - Tehrani.com
Rich Tehrani
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Vonage Left for Dead?

While much of the world is celebrating Good Friday, at Vonage it could not be a worse day as a judge has issued an injunction against the leading pure-play VoIP firm barring it from signing up new customers. Lawyers from Vonage likened this action to cutting off oxygen to the company instead of putting a bullet in its head -- which refers to shutting Vonage down altogether.

The future for Vonage looks mighty bleak as the dollars it spends on current ads are being wasted. Imagine the millions of dollars of ads that have run recently and those in the pipeline prompting people to call the company to sign up. What does the company now tell these potential customers? Please hold indefinitely?

In addition, the company’s churn rate will likely now increase.

I say this because many Vonage customers are calling and e-mailing me and asking what they should do.

I tell them to stay with Vonage as the judge will likely not shut down the service. I can’t imagine a scenario where millions will instantaneously lose their phone service. Imagine the lawsuits this could cause as people who need the phone for emergency reasons cannot get their calls through.

Vonage needs to work very quickly and win the appeal they are seeking or they are in real trouble. I believe Vonage will make it through this eventually but can it make it through and still be profitable is the real question.

To survive, they may have to pay Verizon more fines and even higher ongoing royalties and with existing razor thin margins this might be a nail in the coffin for the company.


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