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Vonage Loses Appeal; Verizon Owed $120 Million

Posted by Zonk on from the need-to-get-out-of-the-spanking-machine dept.

Billosaur writes "Things do not look good for Vonage. Yesterday, they lost their request for reconsideration of their settlement with Verizon. This means Vonage owes Verizon $120 million to end the patent lawsuit filed against them. The costs associated with defending the case have cut into Vonage's bottom line, and despite attempts to cut costs by laying off 10% of their workforce, they may be unable to make a payment against their debt come December. According to the settlement, Vonage will pay $117.5 million to Verizon and another $2.5 million dollars to charity. Vonage's shares have dropped 87% since their IPO, now hovering around $1.50 per share."

5 of 160 comments (clear)

  1. I've Got Their Number by Doc+Ruby · · Score: 3, Interesting

    So will I be able to buy my Vonage phone#, that they've refused to let me port to my own SIP server, when they have the firesale? Or will they sell me to Verizon to pay for their patent infringement?

    --

    --
    make install -not war

  2. Re:Vonage Stockholders? by Anonymous Coward · · Score: 4, Interesting

    anybody who didn't see Vonage's failure coming before the IPO deserves this Maybe I'm just not as smart as you, but I don't think the demise of Vonage was quite so obvious.

    ...with a product (Voice-Over-IP) that doesn't appeal to most folks. Sure, $20-25 per month for phone service is a wonderful deal but the major players with rock solid products have similar prices ($30-40 per month). I don't know about that. Vonage's $25 includes just about everything you can imagine (voicemail with web-access and emailing of messages, caller ID, conference calls, unlimited long-distance, etc.). To get the same services from conventional phone companies costs considerably more (especially if you actually use long-distance). Monthly bills of $60-$100 are not uncommon in those cases.

    And, really, I've seen lots of people interested in the lower prices and better packages that VoIP has to offer. However what seems to be happening are that cable companies are cleaning up in the VoIP space, because they already have the infrastructure, and can offer packages (TV/Internet/phone) that are actually a good deal.

    Vonage, really, was a pretty good business with reasonably satisfied customers. In fact, I imagine they would have stood the test of time were it not for two things: (1) the incumbent monopolies are rich, and (2) patent law gives anyone with enough money the ability to exclude competitors.
  3. Re:Vonage Stockholders? by cdrguru · · Score: 4, Interesting

    Vonage sold its service to tons of DSL customers. DSL customers who were using the ILEC wires. This pretty much means the ILEC was supplying their competitor so the competitor could beat them over the head.

    Not that this isn't an attractive situation. If the government forced you to rent your car out for 50% less than it cost you to rent it, would you be happy about the deal? Probably not. What could you do about it? Maybe nothing directly. But if you could find a loophole like requiring renters to have a million dollar liability insurance policy, maybe you wouldn't have to rent it out as much.

    Or, if McDonalds had a deal that if you bought 100 hamburgers at a time they would sell them for $0.10 each. So you go there, by 100 hamburgers and set up a stand on the corner reselling them - right in front of McDonalds. And your sign is saying how cheap your "McDonalds" hamburgers are compared to the store behind you. Would McDonalds sell you another 100? Maybe not.

    This is the sort of situation that Verizon found itself in. They do not have to support their competitors, but they had to support Vonage. The government and state regulators won't let them stop supporting Vonage directly. So we dust off an old patent and find it can be used to beat up Vonage. If it wasn't for the patent, there would be something else.

    Best stick with one of the under-the-radar VOIP providers that just resells some bulk service from Sprint. Lingo is one of those. Cheaper than Vonage and a lot less visible.

  4. Re:Vonage Stockholders? by Penguinisto · · Score: 3, Interesting
    Okay...

    1. $25 is not "comparable" to $30-40 per month. The $30-$40 prices represent a 20% to ~60% mark-up over Vonage, and you end up with less features (and according to some, less reliability).
    2. VoIP for the masses was not a "saturated" market when Vonage first hit the scene - at least not to Joe and Jane Sixpack.

    IMHO, this little patent spat was Verizon's way of fucking-over a competitor without actually having to compete on merit to do so. (IIRC, the patent is basically a bogus "On teh Intarwebs!" rig-up of existing tech, folks).

    Also, up until this lawsuit, Vonage was actually beginning to turn a profit. Not anymore.

    That said, I honestly doubt that anyone saw it coming, up until Verizon decided they didn't like the competition anymore.

    /P

    --
    Quo usque tandem abutere, Nimbus, patientia nostra?
  5. Re:not good by gatzke · · Score: 4, Interesting

    They are really great. Including all those features at a lower cost is awesome.

    I love getting email when I have a message at home.

    I like being able to listen to it online.

    I like having all my incoming and outgoing call information available.

    I like having forwarding for free.

    I like low cost international and free national.

    I would probably pay a good bit more for this quality of service. TimeWarner offered less at a higher cost, so forget them...