Vonage Loses Appeal; Verizon Owed $120 Million

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."

Comments

I've Got Their Number

[Doc Ruby]

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?

Re:I've Got Their Number

[Doc Ruby]

No, actually it's a SIP provider I'm paying to host some other DIDs that I did either port or just buy (as portable) to put on it. They're running some Avaya equipment, and some Asterisk servers. But it could be my own Asterisk server, if I wanted. That's how LNP is supposed to work: all you're supposed to need is a phone number on a phone, and put in a request to port it to another carrier.

So what? Who cares? What the hell is the difference? Verizon had no problem porting some numbers to my preferred provider, nor did some other telcos, like Sprint, from whom I first got the number. Vonage had a problem.

So what does your buzzword complaint have to do with anything? This is a question merely of whether Vonage will let me port a number, the way other telcos do, the way LNP is supposed to work. If anything, you should throw your buzzwords at Vonage, instead of acting like you're some kind of bigshot. All it does is make you look like you don't understand LNP.

Re:I've Got Their Number

[lzed]

My point is that you would be porting the number from the donor switch to another provider's class 5 switch not to your personal SIP server. Weather you are connected to your carrier via SIP, H323 or ISDN is irrelevant. This issue is between your current carrier and the previous carrier who has the number ported in. In that respect not all carriers are created equal. I could start up a phone company tomorrow and get a block of numbers from an ILEC to sell telephone service. My agreement with the ILEC may be setup that I will not ask them to port these numbers out and retain the large block contiguous. This makes life easier for the ILEC and cheaper for me to rent them. That is a large difference from a carrier who is a CLEC/ILEC participating in LNP and 911 routing directly. Now if this number was ported into a carrier, as you stated in a follow up, it should certainly be able to be ported back out. However, this depends on if a provider has the agreements setup with the people who are actually porting in the number, which may or may not be the same people who are selling you the end customer service, and the new carrier is within the bounds of LNP requirements including existing in the same rate center and so on. The core point I was trying to make is that you cannot port a number to an Asterisk box or any other PBX for that matter. However, you can port it to a carrier who provides you a SIP subscriber termination or SIP trunk or H323 trunk or ISDN trunk which may go to an Asterisk box or personal PBX. Also bringing up mobile phones is irrelevant as those blocks are handled by mobile number portability and do not apply here.

and who woulda thunk it...

[Bananatree3]

as Vonage was going IPO it would come burning down like a flamin' meteorite.

Everyone?

[Anonymous Coward]

It didn't hurt Verizon.

I am sure they would disagree that it needs to end.

And they have a much louder voice than you.

Previous art no longer holds up? Awesome

[CrazyJim1]

Dibs on patenting the wheel.

Re:Previous art no longer holds up? Awesome

[middlemen]

This was on today's Engrish. Mixes prior "art" and patents.

When are patent portfolios restraint of trade?

[postbigbang]

Judge Greene's breakup of AT&T into the RBOCs mean we now have less RBOCs, and if they have patents, they can stifle any competition they want. Is this a new way around the Sherman Anti-Trust Act???

All that's left are a handful of tiny regionals, and Verizon, AT&T, and QWest. MCI is dead and gone... and buying up patents (or even 'cleanly' filing them) means that these companies can effectively shutout the competition.

Not good.

Re:When are patent portfolios restraint of trade?

[Anonymous Coward]

Exactly right. The RBOCs have no intention of giving up their monopolies simply because VOIP was developed. Vonage isn't the one who lost - technology lost. The consumer lost. You lost.

Kick a Verizon representative when you get a chance.

not good

[Anonymous Coward]

This is not good. I've been using Vonage for years. They provide decent service at good rates, specially for international calls, which I use a lot. What is the option now here in North Carolina? Time Warner? Bellsouth? Their service sucks and they are more expensive. Customer support is worse than non-existent. How is the current patent system serving the people? I understand free enterprise and all that, but lately just feel we the people get always screwed. Is this just me?

Re:not good

[GreyPoopon]

f you just need to save money, you can get POTS and an alternate LD carrier.

the combined costs should be within a few dollars a month of vonage.

I seriously hope you're joking. The cost for unlimited local-only POTS service (with Verizon, ha ha) is $5 more than what Vonage charges for their premium residential plan, which includes unlimited calling to anywhere in the US and Canada. If I had to tack on a cheap long distance service, my costs would be an additional $30 per month (all my family lives out of state). Add to that Verizon's nutty ideas of what constitutes a local call, and there'll be an addition $10 per month in "regional toll" charges. That means I'd be paying $45 per month more if I went that route. I'd be better off getting their freedom unlimited plan. Oh, and I spend a couple hours a week on the phone with people in Germany. Vonage is only $.04/minute. How much would that be with Verizon?

Sorry, but there's no way shape or form that one of the local monopoly POTS services is going to be within a few dollars of what Vonage customers are paying now. Nobody would have ever switched from their regional incumbent monopoly unless they had significant reason to do so. There was an element of risk involved in trying out VoIP that required sufficient financial incentive to overcome.

Re:not good

[gatzke]

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...

Vonage Stockholders?

[RobBebop]

Vonage's shares have dropped 87% since their IPO, now hovering around $1.50 per share.

Seriously, anybody who didn't see Vonage's failure coming before the IPO deserves this. They were an unprofitable company in a saturated market 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). And in effect, they will be de-listed soon and become another ghost in the great halls of technology company who never made it.

Re:Vonage Stockholders?

[Anonymous Coward]

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.

Re:Vonage Stockholders?

[cdrguru]

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.

Re:Vonage Stockholders?

[Penguinisto]

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

Re:Vonage Stockholders?

[websitebroke]

As a former Verizon customer who is now a Vonage customer, I can tell you that Vonage is definitely a better deal. POTS service through Verizon cost me about $35-$40 on paper when I first signed up, but the price would always creep up to the $40-$50/month range over the next few years. Then I'd call the bastards up, and we'd be back down to $35-$40. Then the process starts all over again.

Once I switched to Vonage, that problem went away, I've been with them for 3 years, and no price increase. I can call all of USA, Canada, and most of Europe as much as I want for the $27/month I pay, and it never changes. It was really freaking cheap for my wife to call me while I was in Pakistan last year too.

One other thing that POTS doesn't do is send you your phone messages via email.

Re:Vonage Stockholders?

[Belial6]

I have heard this argument many times. The problem with it is that the local phone company is not the same company as the ISP with the same name. Take Verizon for example. Verizon ISP and Verizon Telephone are not the same company. Verizon ISP, which is the company that sold the DSL connection, is in no way hurt by Vonage, so no, Vonage is not competing with Verizon ISP.

Now, if we are going to say that Verizon ISP is not profitable on it's own, and requires the high margin POTS lines to subsidize it, then we have a classic anti-trust case where a monopoly is using it's monopoly position to control a different industry.

Re:Vonage Stockholders?

[That's Unpossible!]

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.

ILECs that were given monopolies in areas in exchange for precisely the scenario you describe -- opening up their copper to competitors.

competition

[TI-8477]

The reason all of th big telco's are going after vonage iss because its business model is far better than their's. Simply put, they're afraid of competition.

Soooo, looks like...

[davidsyes]

Von Boyage?

Re:patent reform

[dynamicdesign]

So I'm confused why can't companies sue Verizon or AT&T for making customers pay $50/month for unlimited data plans when you don't even use their respective networks while using a phone that has built in WiFi capabilities?

Not *this* December

[HunterD]

Read the article, Vonage may default in 13 months (December 2008) not in 1 month (December). Do the editors even *read* what they post?

Sad to see them go...

[andyring]

Granted, as in Monty Python and the Holy Grail, "I'm not dead yet!" but it's sad to see this happen. I was a customer of Vonage almost since they started, and have been quite happy with their service. I only recently canceled on account of simply not needing a home phone and having a company-provided cell phone that I can use for personal calls.

Re:I just hope the commercials go away

[Anonymous Coward]

No, it just changes to:
"Boo hoo, boo hoo hoo..."

Ch 11, but not Ch 7

[bxwatso]

Vonage may not have the cash to make debt payments and they may go bankrupt, but they should still operate and not dissolve.

1. The Vonage name has excellent recognition due to their heavy investment in advertising.

2. Vonage has a paid up license to use the patents required to implement Voip.

3. The various patent holders (Verizon, ATT, one other) should probably go after other Voip providers like Packet 8 who don't have nearly the cash on hand to survive the suits. Therefore, the VOIP consumer marketplace may have only one competitor soon.

Don't buy their stock, for it may go to zero, but also don't expect Vonage to go out of business. Someone will likely want their assets at a reduced (below book cost) price.

Re:Always

[postbigbang]

I understand patent protection, and understand misuse.

I also understand monopolies, and the Sherman Anti-trust Act, The 1996 TCA Act, and other legislation.

What I'm alluding to is that if a sufficient number of patent protections amounts to monopolization of an industry-- once a former public trust-- then there's some thing wrong here.

Vonage is a victim, just as many technology companies are victims, of the patent process. Vonage had a chance,but doesn't now. Yesterday on /. was the story of how AT&T might filter video content. The trend is onerous. Muni-WiFi is dead. As PCs become mobiles/cell phones, the telco monopolies dictate business, not technological advances. It's onerous.

Re:Question

[SeaFox]

How is losing jobs to outsourcing worse than losing jobs to patent law suits?

In one scenario, somebody else gets your job, in the other nobody gets your job.