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Vonage IPO 153

Posted by samzenpus from the voip-stock dept.
mesowarny writes "The street writes: Vonage Holdings, moved to become the first major Internet telephony player to go public by filing Wednesday to raise up to $250 million via an initial offering of stock and named a Tyco International executive as CEO. Our revenues were $18.7million in 2003, $79.7million in 2004, and $174.0 million for the nine months ended Sept. 30, 2005," the company's prospectus says."While our revenues have grown rapidly, we have experienced increasing net losses, primarily driven by our increase in marketing expenses. From the period of inception through Sept.30, 2005, our cumulative net loss was $310 million. Our net loss for the nine months ended Sept.30, 2005, was $189.6million. During the same nine-month period, our marketing expenses were $176.3million."
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Vonage IPO

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  • Business voip? (Score:5, Informative)

    by lukewarmfusion ( 726141 ) on Wednesday February 08, 2006 @08:11PM (#14674278) Homepage Journal
    No link to Vonage [vonage.com]?

    Seriously, I'm really impressed by their success so far. Many of my non-geek friends and family are starting to use Vonage - it beats the heck out of SBC.

    Something that frustrates me, though, is the apparent lack of VOIP for small businesses. I have a small company where my partner and I work from our home offices and on the road, about an hour away from each other. Every call is long distance. We're paying through the nose for our cell phones, which barely work in our houses anyway. Looking around, I've only found a handful of VOIP companies that are affordable, and most of them don't seem to be very helpful for my situation. We were talking about how cool it would be to set up an Asterisk box so we could have the voicemail, forwarding, etc. It's just not something I have time for.

    The Vonage business service doesn't seem like much more than a residential+fax line. Another place I saw sent you a box you had to set up but it was pricy. It's like there's no in-between.

    Anyone have a suggestion?

    • Re:Business voip? (Score:4, Interesting)

      by XorNand ( 517466 ) * on Wednesday February 08, 2006 @08:13PM (#14674301)
      Wow. Strange timing. Might I shamelessly suggest a company that I'm part of: Bright Idea VoIP [brightideavoip.com]? :-) We focus exclusively on small business VoIP (between five and forty extensions). We also offer a unique reseller/partner program for IT support people if they're willing to provide first level support to subscribers.

      /end plug
      • Thanks... I'll check it out.

        I must say, I'm already impressed that you guys have pricing on your website. The other places I've found usually make me call to get info like that.
        • That impresses me, too. Places that want me to call for a price never get a call from me. I could understand that for some custom setup, but there is no good reason to hide prices for standard goods and services.

      • Re:Business voip? (Score:1, Informative)

        by Anonymous Coward
        With all due respect... and I mean that... take this for what it is worth.

        I'm a VAR who has been activly looking for a company like yours for months. I've done business with one of your largest competitors and hate them. The product is incredible, first class all the way. But the support is horiffic. They will downright lie to you about things.

        I have 4 clients with 25, 15, 10 and 20 extensions some with multiple locations. All of them will switch tomorrow if I can find a better provider.

        I won't be calling y
    • SBC offers packages with unlimited long distance. I used Vonage for my small company for a grand total of a month. Had to get rid of it because quailty was horrible.
    • Something that frustrates me, though, is the apparent lack of VOIP for small businesses.

      We tried VOIP for about a year for our small business, and went back to POTS for day-to-day calls. We couldn't get the call quality we wanted for business class calls when operating over DSL.

      We were talking about how cool it would be to set up an Asterisk box so we could have the voicemail, forwarding, etc. It's just not something I have time for.

      We just set up an Asterisk box with BroadVoice for an independent pr

    • dude install asterisk@home 20 mins for the install from start to finsh, no time at all. Cheers, Dean
    • Their success?
      A loose definition I guess.
      180 million in losses, 170 million in advertising.

      Before the dot com era this company would be looking at shareholder lawsuits.

      Today they'll probably generate enough cash to run the business with losses for another 5 years. Then the lawsuits.
    • "Every call is long distance. We're paying through the nose for our cell phones, which barely work in our houses anyway.... It's just not something I have time for."

      This seems like a bit of a contradiction. If you're happy with the long run costs (unwilling to make a short-term time investment), why complain?
    • There are many VoIP providers that specialize in SME and SOHO. Check out http://www.voip-info.org/ [voip-info.org] for a large list.
    • Broadvoice offers a Bring Your Own Device plan for small businesses at about 30 bux.

      We use it with Asterisk, running two home offices using POTS and Broadvoice VOIP.

    • Easy - don't use just Asterisk, use asterisk@home. It's REALLY easy to setup. Get that, a couple VOIP phones, and you're ready to go. In fact, you don't even need the voip phones. You can use a headset and a softphone.

      Only obstacle is network latency. If your internet is shaky, your phone calls will suck.

      Feel free to reply for more info - I can point you in the right direction. You said you don't have time for it. I setup a new installation of asterisk@home today, and it took about 35 minutes from st
    • Check out CoreDial [coredial.com] Disclaimer: CoreDial used to be the VoIP arm of the company I work for, however they were spun off in to an independant company in January, and I no longer have any affiliation with them.

  • this could be a dangerous IPO (Score:4, Insightful)

    by THEUBERGEEK ( 891151 ) on Wednesday February 08, 2006 @08:12PM (#14674291) Homepage
    Considering the current backbone provider backlash against VOIP, Vonage (and others like them) could have a very short business life.
    • Considering the current backbone provider backlash against VOIP, Vonage (and others like them) could have a very short business life.

      Then again, considering the current customer backlash (including potential legal action) against ISPs that interfere with the traffic from particular applications - including ESPECIALLY relatively low-volume streams like those involved in VoIP, this could as easily go the other way.

      Interesting times.
    • It gets worse.

      Vonage's target market is home users with high speed connectivity. The vast majority of home users with high speed connectivity use either cable or DSL, with a small but increasing number using services like Verizon's FIOS. [verizon.com]

      Now, anyone who's got DSL doesn't need Vonage for their primary phone service. True, there's a market for second lines, but the big money is in homes with one phone line.

      This leaves cable users. I don't know about the rest of the country, but here in NYC, Time Warn [twcdigitalphone.com]
      • I have Verizon DSL but I only have Verizon's most basic phone package -- the only extra I have is their wire maintenance package. It costs about $17 per month. Without the wire maintenance package it would be about $13. If Vonage costs you $25 a month, that's still only about $40 for unlimited long distance.

        (And unfortunately I need a Verizon phone line for a security system even without DSL. I don't trust VoIP in case of an emergency.)

        • Re:this could be a dangerous IPO (Score:4, Interesting)

          by mattkinabrewmindspri ( 538862 ) on Wednesday February 08, 2006 @11:25PM (#14674975)
          Sunrocket [sunrocket.com] is a lot cheaper than Vonage, and has very good service. Here's what is included in the $199/year(~$17/month) price:
          • unlimited to the U.S. and Canada
          • $3.00 of international calling included per month (3 cents a minute to many countries)
          • two free 5.8GHz phones
          • voice messaging
          • call waiting
          • two phone numbers
          • caller ID
          • call waiting ID
          • selective call blocking
          • selective call forwarding
          • selective forwarding after a certain number of rings to a different number
          • check voicemail online
          • no contract
          • call logs
          • distinctive rings you can set up
          • no cancellation fee
          I've had their service for two months now, and it's been great.
          • I've been looking for service like this at this price for a while. I am probably going to sign up for this. I noticed on their website that they have a referral program. Since your post is what got me interested, I think it would only be fair if you got the referral credit. If you are willing to send me what is necessary to get you credit (email me), then I'll do that. It says on their website to log into the member area and click Rewards for details.

      • Now, anyone who's got DSL doesn't need Vonage for their primary phone service.

        Speakeasy's OneLink [speakeasy.net] offers DSL without a phone line (I have it) and I'm sure there are others.

        plenty of people would much rather buy phone service from a company they already do business with.

        I was personally thrilled to do away with Verizon and get Vonage. I guess there is some level of comfort in doing business with the "big guy", but that comfort zone will change over time.

        The thing is that technology is supposed t

      • I don't think it's even possible for Vonage to be anything more than a short-lived player in the industry. The thing that drives them now is the high rates the phone companies set for long distance, due to lack of meaningful competition. As soon as cable companies enter the picture, everything will change, and Vonage will be about as relevant as AOL dialup is today. Internet traffic doesn't support QoS, so Vonage's traffic always gets low priority. Right now, it sort of works because the pipes are prett
        • Not it won't. Cox offers telephone service here in RI but prices it at $45 a month. I pay $27 for Vonage.

          VoIP providers took advantage of all the excess switching capacity in the U.S. When the Telecom Act of 1996 was enacted, comanies were tripping over themselves building new switching centers. Lucent and Nortel were living high on the hog for about 5 years. And then the bottom dropped out.

          With so many choices for local/ld carriers business now spread out to a dozen or more vendors. It lessened the d


    • Do something about it lobby your congress man/woman to keep local phone lines open to secondary carriers. I utalize xo, at work, and vonage at home. Trust me a few times a year and my boss make it a point to lobby our congress person regarding the benifits of equal oppertunity access to baby bells networks.

    • Re:this could be a dangerous IPO (Score:1, Interesting)

      by Anonymous Coward
      Sure, it could cause problems. It depends on the sanity level of our court systems, and just how greedy some people (like, say, Verizon) plan on being. The backbone providers are upset because people are using their lines to provide services, as a "free lunch".

      As Heinlein said via Manuel, "TANSTAAFL. There Ain't No Such Thing As A Free Lunch." The problem from my point of view is that the backbone providers, and the wired telcom infrastructure companies, are under the impression they should be paid twice. O

  • Increasing net losses??? (Score:3, Interesting)

    by confusion ( 14388 ) on Wednesday February 08, 2006 @08:16PM (#14674313) Homepage
    I really can't wait to invest in a company that has "increasing net losses". It's like 1999 all over again. I know they're after some capital, but profits talk right now and I really can't see this going well for them.

    Jerry
    http://www.networkstrike.com/ [networkstrike.com]
    • It depends on who "they" are. Meaning the current management, I think the whole process will go very well for them.

      Some investment bank(s) will underwrite the whole deal, guaranteeing that Vonage will raise funds. The investment bank will assume all of the risk of selling the issue, but given how irrational market participants can be, I assume that the underwriters will also make out with a good profit*.

      The only people for whom this will not go well are the people who actually buy the shares at the en
    • I agree with that comment. A company loses 20 million a month then they file for an IPO? What am I missing here...This investment looks like one of the many losers from 1999. Does Vonage have any proof of being able to slow down expenses?

  • enough already (Score:3, Insightful)

    by d34thm0nk3y ( 653414 ) on Wednesday February 08, 2006 @08:16PM (#14674316)
    While our revenues have grown rapidly, we have experienced increasing net losses, primarily driven by our increase in marketing expenses. From the period of inception through Sept.30, 2005, our cumulative net loss was $310

    Maybe that is a clue. I swear there is a vonage commercial on every commercial break of any show I ever watch on cable.

    That song from Kill Bill makes me cringe now when I hear it.

  • Same old story (Score:3, Insightful)

    by The evil non-flying ( 947059 ) on Wednesday February 08, 2006 @08:18PM (#14674334)
    "While our revenues have grown rapidly, we have experienced increasing net losses..."

    I think I've seen this movie...I remember how it ends.
    • They should take a hint from their commercials and stop doing stupid things. Wooo hooo hooo, we just blew a lot of money.
    • Sometimes you have to make sacrifices to be successful.

      Clearly, their marketing has been a huge expense, but it seems clear it has increased their exposure (whether you love it or hate it, everyone knows the woo-hoo song). I'd say it very likely is responsible for a large part of their revenue growth.

      Now, if you cut off that marketing, they are almost break even. I'm sure they've had huge expenses to add the capacity to handle all those new users, as well as things like rolling out better 911 services every
      • I don't think those sacrifices should mean advertising until the people are sick of seeing the ads. For a business, I prefer to see those that control their expendatures better than that.

  • marketing expenses a little excessive? (Score:5, Interesting)

    by egburr ( 141740 ) on Wednesday February 08, 2006 @08:20PM (#14674344) Homepage
    Our net loss for the nine months ended Sept.30, 2005, was $189.6million. During the same nine-month period, our marketing expenses were $176.3million."

    Wow. Their marketing expenses totaled 93% of their net loss. I wonder how what their revenue and net loss would have been without all that marketing expense?.

    Sounds like they aren't going to be able to maintain the all-you-can-use service for only $25 much longer.

    • Re:marketing expenses a little excessive? (Score:4, Insightful)

      by Darkman, Walkin Dude ( 707389 ) on Wednesday February 08, 2006 @08:50PM (#14674467) Homepage

      No, you're missing the point. Marketing for a small and / or growing business is always the biggest expense. You have to get your name out there, get noticed, get people calling you. Marketing, if its done halfway right, is an investment, not an expense. The only conern I would have about Vonage is if they have foolishly invested in branding before they are a brand name (Coca Cola et al.).

    • When I signed up, I was paying $34.95/mo for unlimited US/Canada. Twice they dropped the price on me, each time by $5.

      They're considerably cheaper than the local cable company, Time Warner. I guess TW has two advantages -- bundling for price, and for making it a check-off. Personally, though, I move every year or two, and I prefer keeping it simple with a carrier-independent service.

      I'd certainly not have had a problem with them keeping it at $29.95... I wonder how much that 16% drop in revenue per custo
      • TW bundles for price? Hardly.

        I just established new service a couple weeks ago. There is NO price break for getting their "all in one" package as opposed to getting RoadRunner, digital cable and VoIP separately (I asked about this exact point). RoadRunner is still $29.95/month for the first year (promotion). Digital cable is still $55.82/month. VoIP is still $39.95. You just get one bill instead of three.

        But TW's marketing sure makes you think you get a break. "I saved $30/month on my phone bill!" -
    • You're right, they might have had some positive earnings. At the expense of growth.


    • Sounds like they aren't going to be able to maintain the all-you-can-use service for only $25 much longer.

      Yeah, that's a lot of money for marketing. But, I think they're probably explaining it to investors that it's an initial hump that's already been jumped. Now that they've established themselves as the most known VOIP company, they can coast and retain the marketshare they have and harvest those $25-a-month subscriptions for several years. This is all a guess on my part, though.

      Seth
      • My point was that even if you ignore the marketing expense completely, they still had a net loss. I'm sure there's some office space costs involved, but it seems like most of their budget is going to be bandwidth, POTS connectivity, electricity, salaries, and other repeating costs. If you add in lawyers and E911 compliance efforts, and any new fees our legislature tries to impose, I don't see how they'll maintain $25/month and even just break even.
    • The important number to look at is total revenue and total expenses. Marketing was half of total expenses. Sounds about right, but I would have expected higher revenue growth personally.

  • Should be Vonage "VOIPO" (Score:5, Funny)

    by dotslashdot ( 694478 ) on Wednesday February 08, 2006 @08:27PM (#14674374)
    Shouldn't this be Vonage VOIPO? You need the right tone in the title. I mean come on!

  • Customers might get shares too (Score:1, Interesting)

    by Anonymous Coward
    Customers may be eligible for shares too! http://ipoinfo.vonage.com/ [vonage.com]
  • Does anyone know where you can download the company's prospectus for the IPO?
  • is anyone using Broadvoice [broadvoice.com]?
    • I'm using broadvoice.. So far very pleased.. it works very well andd at less cost than vonage. And they offer multiple plans to fit how much you actually use it.. I'm currently on the $6 100 minutes a month plan as i have my own device (asterisk box and some sip phones from siphardware.com) But their top plan is only $20 and give you unlimited calls to 21 different countries in the world. And you can switch plans at anytime w/o any extra fees.
  • What Vonage needs is to cut back a little on its freakin' marketing efforts.

    There IS such a thing as Too Much of a Good Thing[tm].

    On a side note, I'm glad I ditched Vonage. I'm now using Gizmo and saving money in the process (even with a dial-in number).

  • Marketing expenses taken in perspective: (Score:5, Insightful)

    by Jim Logajan ( 849124 ) on Wednesday February 08, 2006 @09:02PM (#14674523)
    A few items to keep in mind with regard to Vonage's marketing expenses:

    Vonage can cut way back on them without losing existing customers. They are not unavoidable operating expenses.

    If a company intends to be as large as the incumbents, they'll need equivalent marketing - regardless of their current number of customers.

    Vonage could "grow" its revenue so that its relatively fixed high-profile national marketing expense becomes a much smaller fraction of its expenses without reducing its actual marketing expenses a dime. Remember that the amortized cost for the first customer of a startup company that spent $100 million developing its products is $100 million per customer. If the customer growth is exponential while the marketing expenses are linear, the amortized cost declines rapidly with time.

    The more important numbers to worry about are the operating costs per customer, not necessarily the acquisition cost for the earliest customers, which can be misleading.
  • that says you need a certain number of profitable quarters before you can file for IPO.

  • Packet8...? (Score:3, Insightful)

    by nathana ( 2525 ) on Wednesday February 08, 2006 @09:03PM (#14674529)
    The blurb mentioned that Vonage is the first Internet Telephony player to go public, but I happen to know that Packet8 is publicly traded...
    • Packet8 (Nasdaq EGHT) has been a publicly trading company for years, though, the name has changed a few times. They were selling the cheesy video-phones (over analog dialup modems) back in the day. I'm not totally sure what else they did, but I'm sure that it wasn't VOIP back then.
    • The blurb mentioned that Vonage is the first Internet Telephony player to go public, but I happen to know that Packet8 is publicly traded...
      No, Packet8 isn't publically traded. 8x8 Inc (EGHT) their parent corporation is however. EGHT appears to be an infrastructure and hardware provider - with the Packet8 service being one (small) part of a larger company.

  • What do you call Vonage three way calling? (Score:3, Funny)

    by Anonymous Coward on Wednesday February 08, 2006 @09:41PM (#14674549)
    vonage-à-trois

  • Don't like the idea, investment wise (Score:5, Insightful)

    by jmorris42 ( 1458 ) * <jmorris@beau.EEEorg minus threevowels> on Wednesday February 08, 2006 @09:45PM (#14674562)
    Just don't like the idea of dropping money into VoIP companies.

    Short term they are bleeding rectally trying to grow marketshare above all other considerations while the telcos are trying to stamp them out of existance and national governments worldwide want to outlaw VoIP as undesirable competition to the local monopolies and the huge tariff structures they currently reap buttloads of juicy tax money from foreigners off of.

    Longterm, assuming VoIP in general and any one particular VoIP company survives the shortterm, they face the problem of becoming unneeded. Everyone seems to be missing the big picture here, a VoIP provider gives you two things.

    1. Point of presence, i.e. a phone number. Google Chat (i.e. Jabber) can do that part equally well and for zero dollars. Plus as IP6 begins to roll out and dynamic IP & NAT goes away we return to the original Internet where every host has an address, read that as a telephone number/hostname.

    2. An interface to the legacy telco network. If VoIP becomes universal that service becomes far less valuable.

    So longterm the value add a company like Vonage provides drops drastically and thus their net per customer will be on a similar decline to the current fade to zero valuation currently on the accounting books for the existing long distance businesses.

    • Re:Don't like the idea, investment wise (Score:1, Insightful)

      by Anonymous Coward
      That might be true, if Vonage was doomed to offer exactly the same service they do today, for the entire life of the company.

      Fortunately, Vonage also has a bunch of employees, and (hopefully) are working on other projects.

      Joel Spolsky [joelonsoftware.com] says "the goal is not to solve some specific problem, but to be able to convert money to code through programmers". Paul Graham [paulgraham.com] says "What matters is not ideas, but the people who have them. Good people can fix bad ideas, but good ideas can't save bad people." One of the Zop [zope.org]
  • Google is public and has free VOIP service google talk.
  • They have an increasing losses due to marketing. Some people have been frowning upon that, but I think so early in business it is important to capture the market. As much as possible. So I would think they are on right track. Also their service is pretty good. I have them for over an year now and quite happy.

  • Power outage? (Score:2, Interesting)

    by Anonymous Coward
    I'm not trying to troll, but what happens to your VoIP service when the power goes out? Are you SOL? This is one (among other) things that has me passing on Vonage and others.
    • You use your cell phone. In all likelihood you have more than one cell phone in the home
    • Mine works fine when the power goes out, as does my WiFi router, cordless phone and TiVos. All are are on UPS's

      I'd be willing to bet there are many, many people on POTS lines with only cordless phones of the type that require power ( some have battery backup ). All those people are screwed if the power goes out.

      Given how many people have cell phones, I'd be most times power goes out people will reach for the cell without giving it a second thought. And with customers using VOIP and broadband I'd guess th
    • Mod up the parent... this isn't a stupid question.
      I happen to use VoIP with my cable company (phone, tv and inet) and the modem has a backup battery in it thats good for 8 hours. (as in not talking for all that time of course) My phone is normally a 5.4Ghz type, with two handsets. If power would go out, my phone wouldn't work because they need power, but thats why I also happen to have a $6.00 cheap phone just in case. Like another user posted, a UPS would be more optimal.
    • I had this exact thought when I switched from regular land-line to VoIP a few months back. It occurred to me that since I use a cordless phone and don't have a corded phone in the house, I'd be just as SOL whether I went VoIP or not.

      Of course, the other alternative is a UPS... one that provides power for my DSL modem, router, VoIP box and wireless base station. However, I've also got a cell phone for that... and so does my SO.
    • If Vonage can't reach your phone, it has the option of directing to a backup number. So if my power goes out all my calls go to my cell phone.

  • Vonage is in a dead-end business. (Score:4, Insightful)

    by massysett ( 910130 ) on Wednesday February 08, 2006 @10:00PM (#14674637) Homepage
    I am not surprised that Vonage wants to do an IPO. It's Citron's chance to take his money and run. The heads of the company must realize they're in a dead-end business. Vonage will get squeezed on both ends in the market they're in now (Internet-to-POTS calls.) Already Vonage is not the price leader in this arena, so people looking for a bargain will go cheaper. Plus, the Bells and the cable companies will eat Vonage alive, with their bigger marketing budgets and their ability to stuff flyers in millions of monthly bills. Not to mention the Bells and cable companies' ability to do underhanded things with QoS and whatnot.

    Then there are the up-and-comers, like Skype. That's the future of VoIP. Skype is already a better deal than Vonage, and without one-year lock-in contracts. Skype's costs are likely lower too.

    That's why I figured Vonage's strategy is to go IPO, or sell the company. Vonage has been sitting still. They have not been adding any new features to their service--such as a simple, "do-not-disturb" feature that AT&T has. Come on, it's an electronic network! The cost of adding new features must be minimal.

    Plus, the quality of Vonage's service is absolutely abysmal. If Vonage works, great. If it doesn't work, good luck--they will screw you. I have personal experience here. No wonder they've registered vonagesucks.com [vonagesucks.com].

    I now pay over $40 a month for a Verizon landline, rather than a Vonage phone, and I'd much rather give my money to Verizon. However there are probably investors dumb enough to buy Vonage IPO stock.

    • Skype is already a better deal than Vonage, and without one-year lock-in contracts. Skype's costs are likely lower too.

      Skype and Vonage are not competitors. They have products that serve different needs. For example, Skype's own web site says:

      "Skype is not a telephony replacement service and cannot be used for emergency dialing."

      Not so with Vonage. This is a pretty big deal. Furthermore, Skype doesn't allow me to buy an off the shelf VOIP router, plug it into my hub and a phone jack and serve a dial ton
    • I was going to mod you troll but I'll reply instead.

      Skype is already a better deal than Vonage, and without one-year lock-in contracts.


      Where do you get this? I have been a customer with Vonage for a long time (July 2004) and have never had to sign a one-year contract.
  • While our revenues have grown rapidly, we have experienced increasing net losses, primarily driven by our increase in marketing expenses.

    Don't you love how they phrased that like it's an expendeture they have no control over? I mean, hello? You look at you checkbook balance and realize you're getting towards 0 you STOP SPENDING MONEY.
  • I found a company out of miami, called DSLi ... http://www.dsli.com/ [dsli.com] they offer a VOIP Business solution with a Virtual PBX system. They offer a Virtual Attendant, voicemail, call fowording, extentions, the whole 9 yards. I just signed up and I have already saved over $300 on my monthly business phone bill and I have way more options now than I did before!

  • Test your connection first... (Score:5, Informative)

    by fiji ( 4544 ) * on Wednesday February 08, 2006 @10:38PM (#14674812)
    VoIP is cool stuff and can save you a bundle on your phone bills (if you make many long-distance calls). BUT make sure your internet connection is good enough for it. It's not just about throughput, you need low latency and low jitter as well. Anyway, try your connection out at http://testyourvoip.com/ [testyourvoip.com] a few different times of the day and make sure it is worth your time.

    My Dad and a couple of co-workers have Vonage and they all love it. Unfortunately my DSL is pretty much at the limit of the distance from the local telephone CO so my line is not up as much as I want my phone to be... ah well.

    -ben

  • Skype and Google Talk are not the issue (Score:5, Interesting)

    by MadDogTannen ( 836261 ) on Wednesday February 08, 2006 @10:51PM (#14674863)
    To all the people who think that Skype and Google Talk are going to put Vonage out of business, you have to realize that Vonage isn't selling VOIP... they're selling Primary Line Replacement. Their customers expect their Vonage phone service to work exactly like their regular phone service, so they absolutely need to be able to terminate to PSTN, as many Vonage customers will be replacing their primary phone service with Vonage. This is why 911 was such a big deal for VOIP not that long ago... because for many VOIP customers, their VOIP phone line was going to be their ONLY phone line.

    I work for a VOIP company, and I would say that the biggest threat is the big Telecoms that can squash VOIP either by messing with the packets that travel over their wires to destroy QoS, or by pushing the goverment to regulate VOIP out of business. Actually, this is one reason why the company I work for is glad that a big company like Vonage is around to look out for the interests of VOIP companies.

    Vonage is bleeding money in marketing and practically giving away their service (including the VOIP devices that they give to their customers -- which I guarantee is not cheap), and it's questionable whether they'll ever be profitable, even if they tailor back their marketing efforts.

    I would stay away from Vonage as an investment opportunity, for no other reason than VOIP is fighting an uphill battle against the telecoms. Even if VOIP can survive the war with the major telecoms, there are a lot of companies trying to break into this market, and Vonage may find themselves paving the way for another company to claim dominance over the VOIP world, especially if they can't find a way to make themselves profitable soon.
    • Bravo - couldn't have said it better myself.

      I had Vonage and dumped it after they ignored my pleas for bandwidth-related tech support. I've since gone to a local VoIP provider like yours that provides serious support, and haven't looked back.

      All the Skype-sayers do indeed miss the point. VoIP in the home is all about "the number" - the 10 digits that ring the house as well as provide a "point of entry" into my personal communications space from the standard PSTN. With Asterisk and its ilk, VoIP provides
      • But what if Skype had hardware that left you untethered to a computer? Would that be a key component to truly take on Vonage? Or is it more than that?

        Some hardware is going to be coming out in a few months, but I've wondered whether this will have an effect on VoIP. Today Skype can't compete at the same level that Vonage can because of the level of service and reliability that true VoIP providers have, but I'm wondering if it would be possible for that to change? What would Skype need to do to be able to
        • What if? That's a loaded question. I think the value inherent in VoIP also includes (and I failed to mention this before) its basis on an open standard: SIP. SIP runs most VoIP, like HTTP runs the Web (for the most part). SIP gives "presence management" wings to fly, and helps foster competition in a growing field. There are SIP gateways out there that bind PSTN 10-digit numbers to SIP points of presence (your 10 digits). Other SIP gateways manage the inbound PSTN call thru virtual PBXs to whereever y
      • VoIP in the home is all about "the number" - the 10 digits that ring the house as well as provide a "point of entry" into my personal communications space from the standard PSTN.

        Fair enough. I will continue to scream "Skype," because Skype has SkypeIn [skype.com]. It's a phone number, for the cheap rate of $35 a year. Better deal than Vonage, without crappy Vonage support. Further, Skype now has POTS-like telephone handsets. In a year or two this will kill Vonage.

  • Competition from the Bells? (Score:3, Informative)

    by HPNpilot ( 735362 ) on Wednesday February 08, 2006 @10:55PM (#14674878) Homepage
    I just upgraded to FIOS and was told for an additional $5 a month I could get unlimited long distance. When I asked how that came about the reply was that it was meant to compete against VoIP firms. So now I am using Verizon, pay $22 less per month than Vonage was, and am actually able to use my fax at full speed, something that was elusive with Vonage.

    I am not sure I would invest in them just yet.

  • It's a feature that companies are going to be giving away to lure people to their real businesses. It's just a bullet point for an instant messaging client, a cable service package, an internet service package, a residential phone service package, etc, etc.

    Vonage already can't afford the marketing expenses required to recruit and retain customers, and that problem is only going to get worse.

  • Vonage should quit spending on marketing and concentrate on customer service. They are widely regarded as having the worst customer service of any company ever! I wish I had found out about this prior to signing up. I didn't think anyone could top Verizon Online. Vonage has them beat.

  • This IPO reminds me of a swahili proverb that says Chema chajiuza lakini kibaya chajitembeza - The good sells itself while the bad just wanders.

    When marketing expenses are 50% of all your expenditure and you have been in business for some 5 odd years only, there is a big problem. You may bring in more subscribers now but if you do not invest in enriching their experience, they will flitter away very quickly.

  • ...to raise up to $250 million via an initial offering of stock...

    ...to cover their next year's marketing expense. What do they do next?
  • Telio [telio.no] is also doing the same [huginonline.com] in the 2.nd quarter of 2006.

    Telio isn't making a loss [huginonline.com] either.

    (Revenues around $6.4M, operating profit before extraordinary expenses around $700k)

    Caveat emptor: I work for Telio. My views are biased.

  • The problem is that Vonage sucks as a company. I had Vonage, the call quality was poor, the modem had problems which required technical support (for which I had to endure the reading of scripted questions by non-english-speakers), my ISP has enough of an upload cap that you can't really do anything significant on the internet AND get a call at the same time, the call quality is poor, calls are frequently dropped or don't connect, and they aren't groqing fast enough to provide local access numbers to a lot
  • I love my Vonage service but I don't use it in a normal way. My girlfriend lives in Australia now and I will be moving to join her in the not too distant future. I got Vonage and brought the box out there on a visit about a year ago. Once I got one of those 240V universal DC power adapters to work for the power the thing it came right up on her DSL connection with a 716 Buffalo phone number in Australia. I ended up leaving it there. The quality of the calls is better than Verizon's long distance was and I
  • I have seen so many trolls in this thread, and they almost sound like they have valid arguments. However, if you know facts, then they are easily busted.

    1. Vonage does not require contracts. I have had Vonage for well over a year now, and I have referred people to Vonage with in the past month. No one I know who has Vonage has even heard of a service contract.

    2. Myth: Vonage has lost of dropped calls or calls that do not connect. This is false. If you do experience these problems, then it is likly cause by

    • 1. Vonage does not require contracts

      See their Terms of Service [vonage.com]. See Section 2.1 for their termination fee. There's an implicit 12-month contract.

      2. Myth: Vonage has lost of dropped calls or calls that do not connect. This is false. If you do experience these problems, then it is likly cause by a problem with A: Your network set up. B: Your cable line.

      No, not false. Many subscribers have no problems at all, but many do -- so commonly that one has to question the maturity of the technology. Vonage s

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