Vonage: Bad for Shareholders, Good for Consumers

I’ve been a Vonage subscriber for over four years, and have never had any problems

with them. I do know, however, that the company is losing money hand over fist,

and that its share price

is regularly hitting new all-time lows. Today it’s down about 5.5% to $2.61;

it’s worth remembering that Vonage went public only last year, at a price of

$15 per share.

One of the reasons for Vonage’s slump today is the mess that is the collapse

of SunRocket. I’ve consoled myself in the past that Vonage wouldn’t simply

go out of business overnight: someone, somewhere, would put a positive value

on its millions of subscribers, and would take over the company as a going concern.

But that certainly didn’t happen in the case of SunRocket. And the NYT quotes

John Nakahata, former chief of staff for the Federal Communications

Commission, as saying that I should be rather less passive:

“Ultimately, the consumer has to learn to factor in, how stable is

this entity I’m entrusting with my phone service?”

Clearly, Vonage is not a particularly stable company. What with patent fights

and stiff competition in a commoditized marketplace, it’s hard to see how the

company is going to stay afloat for long. And the last thing I want is to find

myself in a SunRocket-style situation where I lose my phone service overnight

and have to struggle to move my number elsewhere.

And even the prospect of a takeover is not particulary reassuring. If Vonage

is bought by some big telco, then there’s a good chance I’ll end up

on that big telco’s VOIP service, complete with the relatively high international

rates I’ve been successfully avoiding by using Vonage. On the other hand, there’s

no point in switching from Vonage to some other small VOIP company, because

all of them are pretty much in the same boat.

For the time being, then, I’m sticking with Vonage, and a lot of the reason

why is that none of the more financially secure players in the market seem to

offer anything like as good rates internationally. US consumers need Vonage

to continue to exist, just to provide some level of competition against the

triple-play packages which are becoming increasingly popular and which bury

highly profitable international rates in the small print. Vonage’s business

model might not be great for its shareholders, but it’s certainly good news

for consumers.