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Vonage can hear Verizon now after losing infringement lawsuit

A suit filed in June by Verizon Communications against Vonage made its way to court last week.  Verizon claimed that Vonage infringed on several patents including the technology Vonage used to connect phones from its Internet Protocol service to traditional phone networks.

Vonage claims it had never violated any of Verizon patents, saying that it has been using third party technology that is already the standard throughout the industry.  One of the such is the voice gateways from Cisco Systems, to route voice traffic over the internet.

The final decision made by a federal judge stated that Vonage Holdings Corp. must pay out $58 million in damages to Verizon along with 5.5% future revenues royalty for any continuing infringements, according to a press release.  The decision came from the U.S. District Court of the Eastern District of Virginia, filing the infringements of three of the five patents under consideration.

The number of Vonage subscribers dropped from 256,000 from the second quarter of last year to 204,591 in the third quarter and then to 166,000 in the fourth with is Q4 loss from $72 million last year to $65 million this year.  Company executives say this is partly due to the bust of the company's commercials.  The next step is to replace the commercials and design infomercials that use customer testimonials to promote the service.

The pull themselves out of the hole, Vonage formed an agreement early this year with Earthlink to begin reselling wireless broadband in Earthlink’s covered cities.  To add to diversity of the companies marketing, Vonage executives have also mentions the company's stake in dual-mode handsets that will allow VoIP along with cell phone calls.

"We are confident in Vonage's future health, growth prospects and longevity," said Jeffrey R. Citron, Vonage's chairman and chief strategist.   Vonage has announced that it is not going out of business and its service will not be disrupted.

Currently, Judge Claude Hilton issued a permanent injunction against Vonage.  The reason behind the injunction is that the judge believes that providing monetary damages "does not prevent continued erosion of the client base of the plaintiff."  The injunction will not formally be entered for another two weeks, said Hilton.

Vonage is requesting to stay the injunction of either 120 days or until its appeal is heard.

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Poor commercials=droped subscriptions? Right...
By arazok on 3/24/2007 8:40:56 PM , Rating: 4
The number of Vonage subscribers dropped from 256,000 from the second quarter of last year to 204,591 in the third quarter and then to 166,000 in the fourth with is Q4 loss from $72 million last year to $65 million this year. Company executives say this is partly due to the bust of the company's commercials.

As a current Vonnage subscriber for 3 months now, I can say that the drop in subscribers is not due to a poor advertising campaign (who drops a subscription because they don't like the commercials?), it's because the service stinks.

In my experience local calls are fair game, but long distance is a nightmare of poor sound quality, unreachable numbers, and false busy signals.

I'm just waiting for my 3 month minimum to wrap up, so I can leave without penalty.

RE: Poor commercials=droped subscriptions? Right...
By edpsx on 3/24/2007 8:50:11 PM , Rating: 2
I have been a subscriber to Vonage for over 3 years. I have had very little problems with their service and would give them the thumbs up to anyone who is considering VoIP. VoIP can have problems if your internet connection is not up to snuff, but thats not a Vonage only problem. So before you bad mouth a company you should probably check your own stuff first. As soon as you switch to another VoIP provider Im betting you have the exact same issues. Even tradition POTS lines can do what you describe with long distance.

RE: Poor commercials=droped subscriptions? Right...
By SunAngel on 3/25/07, Rating: -1
By vorgusa on 3/26/2007 10:35:59 AM , Rating: 2
I have had Vonage for years now and I think it is even better then a landline phone. I use the phone forwarding feature all the time when I go out of town and you can look at phone calls and all sorts of information online. The costs compared to my local phone service is also great considering all the features

By Bootstrap on 3/24/2007 9:11:44 PM , Rating: 3
Well, I can't speak for anyone else, but I've been with Vonage for almost 2 years and overall I've been very happy with their service. I use it primarily to speak to my girlfriend long distance (I'm in the US, she's in Canada), and I don't notice any difference between those calls and local calls. Of the few problems I've had, most have been the fault of my ISP, and those problems that were on Vonage's end have usually been resolved very quickly.

It's true that the reliability isn't up to that of a traditional land line yet, but for what I use it for, it works very well. Far cheaper than the cell phone plan I was previously on, unlimited calls to Canada, and it's far more reliable in my area than any cell phone service I've had.

By dblagent on 3/24/2007 9:53:34 PM , Rating: 2
I tried Vonage and also had horrible overall service myself. Same problems mentioned, I could not reach some numbers for no reason, echoing calls, just overall a bad service for me. The worst part was totally unreachable tech support. I actually waited on hold over 1.5 hours twice! I had the proof in the web record of calls and was not very happy.

I also have hooked up Vonage for others as part of my job and I know that several customers have gotten rid of it too due to problems with the service.

I really wanted to like the service - but I have tried other competing services and found them to work much better. Now, granted, the service may vary by the area you are in so it may work fine in most places, but this has bee my experience.

By AnotherGuy on 3/24/2007 9:55:13 PM , Rating: 2
Same Thing for me... I dont think i can say it better... I ve had vonage for almost 2 years now and never had trouble with it... Canada free, all over US free.. wth u want more for 30$ a month... if i had a poor line that was always because of me downloading 2 much torrents and my Internet connection was crappin out...

RE: Poor commercials=droped subscriptions? Right...
By FujiT on 3/24/2007 10:45:24 PM , Rating: 2
Same here. My parents have vonage and it's fine. We've had it for about 8 months and it's gone down once or twice and that was either b/c of the cable modem or the MTA. Other than that, it's been great. It does get kind of choppy if the weather is bad. Why is beyond me, but that's what happens. For the people that have had troubles, maybe increasing the call quality would help or maybe a different phone?

By Milliamp on 3/25/2007 1:11:15 AM , Rating: 2
Vonage for 3 years here. It saves me $34/month over what my phone bill was and I have no complaints with the service.

By Targon on 3/25/2007 9:59:34 AM , Rating: 2
I had some problems with the service which turned out to be an issue with my ISP. Since those were resolved, I have very few problems and I find the advantages are HUGE compared to Verizon land line service.

By Chaotic42 on 3/26/2007 12:11:04 AM , Rating: 2
Poor quality? Do you have QoS turned on on your router? My Vonage connection is excellent and I have crappy internet service.

By perhaps314 on 3/26/2007 8:48:12 AM , Rating: 2
I had vonage for about 6 months, the call quality was fine. It has it's down times but I thought that was just because they were a young company. The worst part for me was when I wanted to download a torrent it would mess up my speed and reset the connection over and over. I caught off vonage because I have my cell and didn't see a need to spend money on two bills.

By peldor on 3/26/2007 9:57:14 AM , Rating: 3
A poor article summary.

Vonage didn't lose subscribers (they have over 2 million in total). The number of NEW subscribers in Q4 was lower than in Q3. Slower growth, not a decline in size. And that could be blamed on poor advertising.

What's more interesting is nobody has even commented on the effects this judgement could have. Personally I think Vonage is going down. They probably need to double in size to turn a profit, and that was before this multi-million dollar ruling and the extremely painful 5.5% ongoing revenue "sharing". If this ruling stands, Vonage will never turn a profit.

VoIP in general
By archcommus on 3/24/2007 10:02:58 PM , Rating: 4
The reason VoIP in general right now doesn't seem to be a strong market to me is because it seems many households are transitioning to having no landlines at all. When you have three kids and two parents all with their own cell phones and a total bill of over $100/month, why add ANOTHER $25/month on top of that for a VoIP landline when nobody will even use it? It seems like America's youngest generations graduating from college and getting their own homes seem to be doing this.

RE: VoIP in general
By TheRequiem on 3/24/2007 10:50:24 PM , Rating: 2
The Service I have had with Vonage in general has been fairly ok. There has been problems, mostly because of myself, but Vonage is allright honestly. I've never had anything like a "horrible" experience with them, it's just a damn phone... and it works. To me it is almost unreasonable to pay for a land-line phone and have the same features as Vonage and pay over $100 when I can just pay 27.95 a month for little to no hastle. The company is on par with competitors, besides everytime I call... its to damn India. Thats allright though, as long as they speak English and I can get it working successfully. I give it a "fair" status, only for a few imperfections that could definitely take some improvement. Its definitely allright for the price.

RE: VoIP in general
By spwrozek on 3/25/2007 1:55:10 AM , Rating: 2
I would say you are right. None of my friends who have apts or rent houses get a land line. My parents only have a land line because they have to get DSL and they were forced to get a phone line. Why get a phone line when I have a ridiculous # of min and can call anywhere in the states and it cost me 40 bucks a month and can take it anywhere I want. Mobile phones will be the only way to go in the future. There will be no reason for land lines.

RE: VoIP in general
By vorgusa on 3/26/2007 10:43:58 AM , Rating: 2
While I agree with what you said there is something to be said about the quality of using a home phone.. I hate talking on cell phones especially when the person I am talking to has dropped calls and every cell phone I have had does not have good sound quality.

RE: VoIP in general
By Lazarus Dark on 3/25/2007 1:29:04 PM , Rating: 2
When I moved out from my parents house at 18 about 7 years ago I got a cell and just haven't ever needed a landline. And 3 years ago, I dropped the cell phone and have lived happily with skype and email for 3 years now. I am looking at getting a wifi phone though, for the rare occation I really need to call someone outside my apartment. But my generation has never had a real need for a landline. I say they won't exist within 30 years or less, even payphones and such will be cell or voip.

RE: VoIP in general
By hands on 3/25/2007 5:19:22 PM , Rating: 1
A lot of people complain about how backwards the U.S. is in terms of certain technologies, such as wireless networks. The biggest reason is because U.S. law was written in a way that for rural development to occur in certain cases, various utilities such as electricity and telephone lines must be paid for and funded by commercial entities wanting to move into those areas. The U.S. now has a very well developed network of traditional phone lines, but newer technologies are considered luxuries. Therefore, in the past, it has been cheaper and more reliable to get a traditional phone than a cell phone.

OTOH, in places where traditional phone lines aren't as ubiquitous, cell phone towers were/are much cheaper to construct than a wired network.

Now that wireless networks and the internet are ubiquitous (in developed areas of the world, including the U.S.), traditional phones don't make a lot of sense from an installation perspective. Traditional phones are no longer the cheapest option, and they certainly aren't as flexible as other options. So, I would agree that the traditional phone system is slowly becoming as obsolete as the telegraph.

The ship is almost sunk
By cochy on 3/25/2007 3:21:48 AM , Rating: 2
Vonage has been an utter disaster of a business almost from day one. This lawsuite might just about do them in for good. They are facing legal battles from customers who claimed Vonage conned them into buy their stock, which is at a wopping $3 now. I don't think they've had one profitable quarter in their existance. With this huge drop in subscriber base, I just can't see this company making it for much longer. Honestly I don't see them offering much of a savings to customers over traditional phone line. Especially with the added complexity inherent in Voip services. Power failure? No phone. Internet down? No phone. Voip will fly with business models like Skype and such. Not with Vonage.


RE: The ship is almost sunk
By alifbaa on 3/25/2007 5:59:43 AM , Rating: 4
I don't understand this nonsense going on recently of investors suing companies when their stock declines precipitously. If the stock had gone up half as much as it's gone down, would they be suing? Of course not. No one "duped" them into buying stock. In fact, I'd bet they got a pretty good deal on it with reduced transaction costs, etc.

Our financial system is built, indeed its success is dependent upon, people being able to both gain and lose money. I think it is the worst kind of attitude which says that if you lose money on an investment you can just sue to get some money back. Do your research, invest wisely, don't whine when you lose.

Why have a home phone
By FITCamaro on 3/26/2007 6:53:56 AM , Rating: 2
As another person said, I really don't even see the point of having a home phone any more. Everyone has cell phone's now days anyway so if every member of the household has one, why do you need a home phone?

RE: Why have a home phone
By w1ckedj on 3/26/2007 8:37:33 AM , Rating: 2
If you have young kids and have a babysitter over to watch them you need to have a phone in the home. Not every 14 year old kid has a cell phone so you need some sort of "land line" for them to use.

For me I have had Vonage now for 2 years and love it. I had a small issue in the beginning with people hearing audio cutting out but it ended up being an issue with my ISP and upload bandwidth. I had my bandwidth raised for upload and everything has been fine since. I make local and lots of long distance calls with out any issues and all with great sound quality.

RE: Why have a home phone
By kattanna on 3/26/2007 12:50:05 PM , Rating: 2
the ONLY reason we have a landline is because of our need for DSL. heck the phone isnt even turned on.

like has been stated by others, me and my fiance only use our cell phones for actual phone calls.

by the time we move in a couple more years, im hoping that people will be able to get either DSL or canle modem service WITHOUT having to get the TV or phone service, aka unbundled service, as we willnt have a need for those services, just bandwidth

Works great for me
By alimohamad on 3/25/2007 4:44:34 AM , Rating: 2
Vonage has been great for me. I've had it for over a year now and use it for business. I live in Canada, my company is in the US and I handle support and sales calls to the US. The office can call me local, I can call them for free, I can call customers for free, etc...Never had a dropped call or bad connection/voice!
The best part, I take my Motorola VT2442 Vonage router with me when I travel and connect it to either wired or WIFI Internet in Hotels (WIFI-to-Ethernet via DLink DWL-G820) and all of my numbers go with me. You gotta love technology when it works...
I would hate to see Vonage go, I don't know what other options I would have without it!

RE: Works great for me
By Kensei on 3/26/2007 2:13:27 PM , Rating: 2
Agree. Vonage has been a great service for me here in Arlington, Virginia. My wife forgot we gave up Verizon two years ago for Vonage because she couldn't detect a difference in call quality. She thought we still had regular phone service.

Why I switched from Vonage to SunRocket.
By Mitch101 on 3/26/2007 12:18:38 PM , Rating: 2
Problems I had with Vonage.
1- Paid for fax service that never worked. Wasted money.
2- Tivo would not work over Vonage. I didnt expect it to but I was paying for the fax service and it wouldnt even work on that.
3- Answering service had many bugs the biggest one when when I was looking for work it would have messages I could not retrieve. This happened a lot. A few hours later to several days later I could access those messages. Not good when looking for a job.
4- Outages. Man in the North Carolina area at least twice a month it would go out for several hours.

We looked at it as being a basic phone line and with that we decided to try SunRocket.
1- Tivo can make its daily call on my Sunrocket Device.
2- I can fax with SunRocket and it doesnt cost me extra.
3- Answering service has been much better. At first we had a few saying there was a message when their wasnt but that hasnt been a problem in about a year now.
4- Any outages have been the result of power outages and my cable provider being switched from Adelphia to RoadRunner/Time Warner.

Its not to say that we never have a problem with SunRocket but actually I can say SunRocket in the Charlotte, NC area has been excellent and significantly better than Vonage. I would assume that your area may vary from each of the providers.

By Mitch101 on 3/26/2007 12:25:53 PM , Rating: 2
Oh I almost forgot about the false busy signals I used to get on Vonage. Just read about that in another users post. Also a few 800 numbers it would tell me I could not call that number but I dont recall the message it would say.

Sunrocket also cost me $8.33 a month for unlimited. Every now and then they have a 2 year sign up for $199.00.

Works for me
By MarkJ4 on 3/25/2007 12:47:04 PM , Rating: 2
Been with Vonage since 2003. There is no better service with comparable rates.

Yes, it goes out when you lose power and/or internet, but I have a cell, so no big deal. My cell does not give me free calls to Europe though, and Vonage does. Only Vonage does. That sells it for me, and makes up for the small inconveniences.

Fact is, the phone companies charge a ridiculously high price for what they offer. I would wait for the results of an appeal before hammering the nails in the Vonage coffin.

Vonage rocks for me
By bigboxes on 3/25/2007 3:45:12 PM , Rating: 2
Been happy with Vonage for about two years now. Sometimes the qual is choppy due to too many torrents running, but it's not like it's my only means of communication any longer. With the internet and cell phone I no longer need a dedicated lan line. So, my home phone bill is half what it used to be. I could probably get by with just a cell phone, but cell service is not 100% reliable by any means.

Works great
By Spivonious on 3/26/2007 9:58:27 AM , Rating: 2
My parents and my sister both use Vonage and I'll be signing up as soon as my cell phone contract runs out. My sister had some problems with getting hers to work but it ended up being a problem with the phone she was trying to use. She bought a new one and hasn't had any problems since.

If anything, I think that annoying song in their ads is lowering their subscriber rate. That and the fact that more companies are offering VoIP services now, Comcast being the most notable. $99 a month for digital cable gold (normally $89), cable modem (normally $42.95), and VoIP for a whole year. Not too shabby, plus everything is on one bill.

dropping vonage
By icab on 3/27/2007 2:22:09 AM , Rating: 2
The article should have been more clear that the number of *new* subscribers per quarter changed.

After 2 years of Vonage due to poor cellphone signal at my home, I am ready to get rid of this crappy service! I've alwyas been disappointed with their international service. Like others have said: I get false busy signals, connection problems, lots of lag, annoying problems very often when calling from US to Singapore, Indonesia, and Brazil. Local calls in the US are always fine, however.

"Nowadays, security guys break the Mac every single day. Every single day, they come out with a total exploit, your machine can be taken over totally. I dare anybody to do that once a month on the Windows machine." -- Bill Gates
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