Will Vonage and independent VOIP survive

There has always been a question of could Vonage and other independent VOIP providers survive when cable companies and traditional telcos got into the VOIP ( Voice over Internet Protocol ) market. Up to this point both have been able to coexist together. With the independent VOIP providers surviving on price and features. Most people would agree that when shopping for VOIP service you will find that independent providers offer more features at a lower price point. With Vonage losing to Verizon in court yesterday could all this change? Vonage has now been hit with a very large damage settlement they must pay. On top of that the company must pay a 5.5% royalty rate on each Vonage customer, per month. This would seem to make Vonage a less attractive buyout candidate. At one point it was likely that another company would be willing to purchase Vonage for it's subscriber base. I highly doubt anyone wants to purchase a company with this much legal baggage. My thought is that everyone will wait until Vonage folds under pressure. Then pick up the pieces at a fire sale.

To me the most important question is what affect will this recent ruling against Vonage have on the VOIP in general? Does this ruling give Verizon ammunition to sue other VOIP providers for damages? Is this just an isolated case of Vonage using technology it hadn't obtained a licensing agreement to use? Or will we see Verizon going on a lets sue everyone because we now have a patent ruling? Would the FCC step in to stop such craziness? We have a fairly new industry that has brought a decent amount of competition to phone service. The quality and features offered for the monthly price beat anything offered by more traditional phone companies ( telcos ) and cable providers. So will consumers once again be forced to pay higher prices for less features and service options? Are we going to see an era where again only the biggest industry names control the market? Already we have slowly seen the traditional phone market be brought back to the days of only one provider. Some of this is do to operating cost. It will always be more cost effective in most cases to be a bigger operator versus being one of the little guys. So now we have seen consolidation after consolidation until the level of competition has again shrunk to very little.

The FCC would point to wireless, VOIP and cell phone service as competition. Yet the fact remains that the traditional telcos control the majority of two of those three services. So how can this be competition when your in effect competing against yourself? If the more traditional phone providers such as Verizon are allowed to kill competition with patent lawsuits. The consumer will be back to the point they were years ago. This will effectively kill off an industry that has just started to take shape in the past 10 years. Then again maybe all of this will work itself out. Maybe licensing agreements will be made and we will see the independents find a way to survive. There of course will be many appeals. Yet I think there is still some validity in cautious worry. Many early adopters of VOIP technology knew they were taking a risk. This risk has greatly declined as the industry has matured. Do we now have to worry about waking up to no phone service one day? Will Verizon now be the company that holds a fledgling industry in it's stranglehold? Only time will tell.

I'd tend to bet that the jury in this case doesn't fully understand the technology. I would also bet that the jury had no idea of what impact they would have upon the everyday consumer. I'm sure they followed their jury instructions and came to the conclusion they felt was right. In the end however they may have very effectively just killed any choice that consumers have had recently in choosing phone service and features.

Granted VOIP wouldn't be considered all that cheap by many. Do to the fact that you must pay for broadband service to be able to obtain VOIP. Although some people have had limited success with using VOIP service over a dialup connection. This negative aspect of VOIP service has diminished recently though. Prices for monthly broadband service have declined. If you compare total cost of services. I think you will find that in many cases consumers are paying the same amount they would pay for local and long distance service with a traditional phone carrier. Your average cost for entry level broadband varies from $15 to $45 a month. Keep in mind the $15 option is mostly AT&T DSL. You can't get “naked DSL” in most cases. So you would have to have phone service with the DSL provider – normally a traditional phone company. This makes VOIP not really an option. In my area cable broadband is $35 a month if you have cable TV. Most independent VOIP services run from $15 to $45 each month. Lets just average that to a total cost of $70 a month for VOIP and broadband service. Well within what most people with a few features would pay for traditional local and long distance together. Keep in mind most independent VOIP carriers offer free calls to all of the United States and Canada. You wouldn't get that type of offer from a traditional telco or cable company.

My household pays $19.95 total for all phone services using the VOIP provider Broadvox Direct. That was an introductory offer no longer available. Our broadband provider is Insight Communications. We have the highest speed tier they offer for $79.95 a month. That gets us a 15000/1500 connection.

On a side note – it is extremely interesting that no mention of this was made in the State Journal Register article today on Insight Communications finally releasing their phone service in Illinois. With a quick check of this weeks newspapers I could find no mention of this very important topic.

One more quick side note. Vonage USA declined me as an affiliate ages ago but Vonage Canada had no problem accepting me. How very odd.

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Insight Communications rumored to be releasing VOIP to Springfield, IL in June of 2005 – Iggy Uncensored

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Good discussion on taxation and fees for VOIP – Iggy Uncensored

BroadBandReports News » Vonage Loses VoIP Patent Case – Ordered to pay Verizon $58 million, and 5.5% per subscriber, per month

BroadbandReports News » Verizon Goes For Vonage's Jugular – Asks Jury for $197 million & $4.93 per Vonage customer per month

Forums » Vonage » Vonage loses to Verizon

BroadbandReports News » Vonage Investors Spooked – Company can't get out of cable's shadow

Vonage Told to Pay Verizon $58 Million Over Patents (Update6) Bloomberg US

US jury finds Vonage infringed on 3 Verizon patents  TeleComm  Reuters

GigaOM » Vonage Owes $58 M in Patent Case

Pendulum Swings Back To Ma Bell – Voxilla

Vonage to pay $58 million in Verizon patent case  CNET News

Why Vonage Doesn’t Deserve to Die » ReWinD

Voice over IP – Wikipedia

Telephone company – Wikipedia

Fire sale – Wikipedia

Vonage  Press Room  Vonage Vindicated on Four of Seven Patents

Vonage and Verizon head to court in patent dispute  CNET News

Vonage found guilty of violating Verizon patents – MarketWatch

BroadBandReports News » Vonage Insists It's Business As Usual – Should customers be concerned about the recent legal decisions


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