Vonage's Troubles Keep Piling Higher And Higher

from the not-the-company's-finest-moment dept

Tue, Aug 1st 2006 7:45pm — Mike Masnick

It's not like there weren't plenty of news and analyst reports prior to Vonage's IPO talking about how weak the financials looked for the company. Hell, even before they filed to go public, there were serious questions about the financial viability of the company. It was clear that they were spending a ton on each customer and they faced an awful lot of competition. Yet, once Vonage realized institutional buyers weren't so interested in the stock, they turned to their own customers, sending them a pre-IPO spam about "sharing their success" with their customers -- which was really shorthand for filling in the lack of much needed institutional investors with suckers who think that just because they like their cheap phone service the company is a good investment. Of course, even then, the company bungled the offering, making many customers think they weren't allocated shares when they really were. This upset customers who claimed they didn't know they'd been granted shares, and who would have sold before the stock tanked (as it has done consistently since the IPO).

Now, with its first earnings report as a public company the situation looks even worse in almost every way. Marketing costs have continued to increase. Competition has continued to increase (and Vonage's response to the threat of cable VoIP players doesn't inspire much confidence). Customer churn has also increased -- perhaps, in part, due to the way they bungled the IPO for their customers (maybe falling back on those customers to fill in the gaps wasn't such a good idea after all). Oh yeah, it also appears many of those customer/shareholders still haven't paid for the stock. And, on top of all of that, it seems that those customers they roped into the IPO weren't even enough to fill for the missing institutional investors. Vonage ended up having to buy nearly $12 million of its own stock to meet its IPO obligations. This IPO has shaped up to be nothing short of a colossal failure for the company. It had been rumored all along that the IPO plans were really a bluff to get someone like BellSouth or Sprint to buy them out -- but the telcos called that bluff and they're probably happy they did.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

41 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

john, 1 Aug 2006 @ 7:37pm

what's the use of VoIP if i can't use it on my mob
VoIP is fine for my home - but I'm out all the time talking on my Mobile. Check out www.globedialer.com They have cheap international calls from a mobile phone. Globe Dialer allows you to use VoIP on the go without calling cards or PIN codes.
[ link to this | view in thread ]
Whatever he said, 1 Aug 2006 @ 7:52pm

Self-Fulfilling Prophecy
Reminds me of this commercial I saw where this idot trys to ski off a roof and falls flat on his ass ... oh wait.
[ link to this | view in thread ]
Robert Rittmuller, 1 Aug 2006 @ 7:54pm

It's so easy.....
One thing that has always bothered my about end user VOIP services like Vonage is the simple fact that they are so easy to duplicate. Add this problem onto the IPO gack and I don't see much of a future for any players in this sector. You want to make money in VOIP, design or produce systems that handle huge volumes of calls from pots systems over long hual links.....now that might be something interesting....till Verizon turns off your bandwidth! Doh!
[ link to this | view in thread ]
relativismstinks, 1 Aug 2006 @ 9:12pm

Re: Self-Fulfilling Prophecy
no no, you're thinking of that company whose commerical has that idiot jumping off the trampoline into a pool but misses and racks himself... oh, wait.
[ link to this | view in thread ]
Vonage subscriber, 1 Aug 2006 @ 9:39pm

I'll start caring when...
I'll start caring when Vonage goes out of business. Until then, my phone still works and I only pay $25 a month for unlimited U.S. long distance.
[ link to this | view in thread ]
butrelativitykicksass, 1 Aug 2006 @ 9:39pm

Re: Re: Self-Fulfilling Prophecy
no... those commercials with that annoying song that you want to get out of your head but once you hear it it won't stop and is on an endless loop stupid catchy 1 4 5 blues riff... oh, wait.
[ link to this | view in thread ]
Rick, 1 Aug 2006 @ 9:39pm

Vonage is a joke
I considered vonage at one time, but never tried it. About a year ago my cable company convinced me I need their 'digital phone' (ie: fancy VOIP) so I signed a year contract. About two months ago I tried Skype, liked it so I paid $12USD for a phone number so people could call me from any phone.

Yesterday I called my cable company and shut the digital phone off. I told them I was going with Skype for $4 a month with free voice mail. They told me the call quality was terrible and I wouldn't like it (it's all I used for the past 2 months, in test). I said, "Really? You sound just fine to me right now, I'm calling from my Skype number." They quit arguing and trying to resell it to me after that.

Anyway, I don;t see how even the telcos expect to compete with $4 a month phone service with free long distance and voice mail. I also don't care. The phone companies are just as bad as the idiots at Vonage who think they need to spend 5 times what they make on commercials rather than their customers. $25 $30 $40 and $50 a month for phone service is ridiculous.

They either need to offer more features, get rid of their expensive delivery mechanisms (HA! Copper wire?! It's 2006!), and some decent service NOW or go bankrupt like any other defunct business model should.

Adapt or die.
[ link to this | view in thread ]
Crimsondestroyer, 1 Aug 2006 @ 10:27pm

RE: Vonage is a joke
The difference betwene Vonage and the telcos is that Vonage doesn't have a state sponsored monopoly.
[ link to this | view in thread ]
Anonymous Coward, 1 Aug 2006 @ 11:14pm

Tried it, hated it....
I tried Vonage last year... All of the features were great, if they worked. Now I ddin't expect perfection, especially with sometimes spotty cable service. However, I did expect the features like call forwarding and voicemail to work. We had numerous experiences of friends calling and getting busy signals or dropped calls. (Should have forwrded to one of TWO cell phone numbers supplied....) At least I have anextra router now....
[ link to this | view in thread ]
?, 1 Aug 2006 @ 11:34pm

I love my Vonage
Been a customer for a little over 1 year now. It will suck greatly if they die.
[ link to this | view in thread ]
Christopher Lewis Shaver, 2 Aug 2006 @ 12:00am

Completes The Kill Bill Trilogy Quite Nicely Don't
Makes me think of vonage as the carnage left on the floor of the swordfight in movie one. Hey, wait....isn't that the same song?!?
[ link to this | view in thread ]
Anonymous Coward, 2 Aug 2006 @ 12:36am

Re: RE: Vonage is a joke
Telcos are a "state sponsored monopoly"??? There's so much competition out there that no one can make any money!

POTS, ADSL, data services... all sold by multiple companies almost everywhere except rural areas.
[ link to this | view in thread ]
Anonymous Coward, 2 Aug 2006 @ 12:41am

Re: Vonage is a joke
This is actually the coming problem. So many companies using more and more bandwidth. IPTV, VOIP, etc.

Why should a telco spend the money to upgrade the backbones when they see no profit from the usage? In fact, much of that bandwidth usage actually takes customers away from them!

So, enjoy your $4/month phone service with free long distance and voice mail... just don't complain when the companies supplying the backbone run out of bandwidth!
[ link to this | view in thread ]
Stymie, 2 Aug 2006 @ 12:55am

Do people know they can get VOIP for next to nothi
Everyone can have their own opinions about whether they like their phone service or not, but I'm just wondering if people here supporting Vonage realize that they could purchase a USB phone, or hook up their normal phone (cordless or corded) via a USB box to their computer and use Skype for basically free?

You can get a phone number (in any area code) for a few bucks per year, and then dial all around the US for free, zip, nothing, nada. $25 bucks a month for vonage sounds pretty cheap - but not compared to $3-4 per month for Skype or $0 per month for Lycosphone.
[ link to this | view in thread ]
Muzz, 2 Aug 2006 @ 2:48am

Re: Vonage is a joke
First thing i noticed is the comment about copper wire, just what do you think is in that ethernet cable?

oh well.

As far a vonage is conserned they lost ALOT of customers cause they didn't REALLY tell them that they had to have high speed internet, which most have through POTS's Telco which inturn have to cut the internet when you change phone service providers, so unless you have internet with someone OTHER than your phone company then you can't use vonage.

Heres the REALLY funny thing.... vonage really thought that there company would work. lol

Too funny
[ link to this | view in thread ]
Mike (profile), 2 Aug 2006 @ 3:22am

Re: Re: RE: Vonage is a joke
POTS, ADSL, data services... all sold by multiple companies almost everywhere except rural areas.

Hmm. Here I am in the heart of Silicon Valley and I have one choice for POTS. One choice for ADSL. I have two choices for data services, but both require a bundle with another service that I don't need or want.

That's not competition.
[ link to this | view in thread ]
Proegssilb, 2 Aug 2006 @ 5:10am

Re: Vonage is a joke
So, enjoy your $4/month phone service with free long distance and voice mail... just don't complain when the companies supplying the backbone run out of bandwidth!

Supply and demand... If more people use more bandwidth, the backbone will be forced to upgrade.

[ link to this | view in thread ]
duh, 2 Aug 2006 @ 5:58am

Re: Re: RE: Vonage is a joke
Telcos are a "state sponsored monopoly"??? There's so much competition out there that no one can make any money!

Horse shit. copper wire is still subsidized which is why it near fucking impossible to get fiber optic ran accross the entire U.S.

as for the money telcos have made thier billing inconsistant enough and difficult to understand as to hide how much money they make. Seriously it cost next to nothing to use VoIP since it is not trying to hide re-payment of paying for copper lines in the 50's nor having to pay it. The FCC doesnt get a cut and it's harder for the goberment to tap into. The telco's have an overexpensive Model T Ford that get 2 miles to the gallon and a top speed of 15 MPH with gas today a mini- cooper (VoIP) sounds more intellegent. I have Vonage the service is great. If you need customer service though learn Hindi.
[ link to this | view in thread ]
no sh*t, 2 Aug 2006 @ 6:03am

Re: Re: Vonage is a joke
First thing i noticed is the comment about copper wire, just what do you think is in that ethernet cable?

hmm just like in my cable line........but wait my goverment didn't piss away billions to bury my ethernet or cable line.
[ link to this | view in thread ]
pleaz GOD, 2 Aug 2006 @ 6:06am

Re: Re: Vonage is a joke
Supply and demand... If more people use more bandwidth, the backbone will be forced to upgrade

I hope so because 1935 technology (copper line) sux

most of europe has fiber optic and a T1 line cost the equivlent of dial-up in the US.
[ link to this | view in thread ]
KevinG79, 2 Aug 2006 @ 6:52am

Umm, what's the problem?
Why do I keep seeing these stories about Vonage? Not sure why they keep getting picked on. I had vonage for 2+ years and it was the best quality phone service I have ever had. The only reason I cancelled is because I moved into a new apartment which comes with "free" phone service, so I no longer needed to pay for Vonage. But, in the old place, it was great. 24 bucks a month for unlimited LD. That's hard to beat. As long as you have a reliable cable or DSL provider, Vonage is awesome.

I hope they can survive. I got much better service from vonage than I do now from the big bad monopoly phone company. I'm just glad it's included in the rent, cause I'd never give a dime to the big phone companies.
[ link to this | view in thread ]
Anonymous Coward, 2 Aug 2006 @ 7:50am

Re: I'll start caring when...
sounds like someone from vonage planted an ad
[ link to this | view in thread ]
Mau, 2 Aug 2006 @ 7:50am

they are good != they are doing good
I had a long-time 'love' affair with Vonage... I think they are great. Now they are not the best solution to my needs, but I think they are awesome.

I guess their biggest problem is that they are pioneers... and they are being banged by big telcos. It's like fighting the government... or the government's interests.

They offer an awesome service, and if your service was 'sucky' that means that your broadband provider was not the best you could get. Don't blame it on Vonage, blame it on the ISP.
[ link to this | view in thread ]
SMB, 2 Aug 2006 @ 8:39am

Vonage is ok, but I want more
I've had Vonage for 8 months or so, and it does a pretty good job doing what it does - just mimicking my old phone company for a better price. Some of the forwarding and voicemail stuff still doesn't work perfectly, but it is ok.

If any VOIP service wants to really compete and survive against the $4/mo bargain companies, it has to give me a lot more. I would gladly pay $25/mo for a service that provides me more features over $4/mo for a service that just gives me phone and voicemail (ok, maybe $20/mo...)

Some things I want:

I want to be able to customize the displayed caller id name for any phone number. I can barely keep up with the stream of boys calling my daughter without memorizing all of their parent's names too.

I want to be able to add numbers to a block list, and to be able to choose individually for each number to instead play a recorded message and hang up, to send the call automatically to voicemail, to give a busy signal, or to never answer the call at all.

This is VOIP! My computer is sitting _right there_!! Send it a packet when I get a call, with the caller id information. Send it a stream when I get a message. Send it lots of information in an open protocol and, get this, YOUR CUSTOMERS WILL WRITE YOUR APPS!! How brilliant is that? I want my computer to announce the name of the caller when I get a call so I don't have to run to the phone to check the caller id, and to be able to run an easy-to-use answering machine app to list/play my messages, and I am more than willing to write code to do it.

And I don't want to log onto a web page to do this either. I know you want me to see all of your ads over and over, but I already bought your service! Leave me alone! I want to glance at my computer when I get home to see who called and when, not spend 10 mins logging into your slow-a** website.

I want my computer to play the voicemail message as it is being recorded, and allow me to pick up the line at any time, so I can still screen my calls like I can with my answering machine. Should also be available to be added to a custom app.

Has Vonage added any new features at any time recently? The WiFi phone is cool, and the V-Phone is, er.., weird, but I want new features added to my service, not just new products to buy that I don't need.
[ link to this | view in thread ]
Lay Person, 2 Aug 2006 @ 8:43am

Quit this shit!
So Vonage is having trouble.

So what? Vonage is still better than any other service out there.

Why does the media try and undermine Vonage? It's clear to me that there is big money behind this mudslinging!

They hate Vonage because it works and it costs almost nothing compared to the phone companies.

Instead of bagging them all the time, look at what Vonage is doing right. They are flipping the finger at the status quo...I love it!
[ link to this | view in thread ]
Lay Person, 2 Aug 2006 @ 9:10am

Re: Vonage is ok, but I want more
Problem is is that all these features that you want is provided by the actual phone company which owns and maintains the switching equipment that Vonage depends on. At some point Vonage has to traverse this equipment and the phone company that owns it is going to charge for the use of that equipment.

Phone networks are switching technology whereas VoIP is strictly digital. Digital is cheap, switching is up to the phone company. This grey area is what the phone companies are depending on to keep Vonage at bay.
[ link to this | view in thread ]
Brian A., 2 Aug 2006 @ 9:21am

Re: Re: RE: Vonage is a joke
POTS, ADSL, data services... all sold by multiple companies almost everywhere except rural areas.

Yeah, I only have one choice as well. AND the telco told me it'd take a month to hookup. I said screw-you-very-much and now just use the cellphone. Free long distance in the evenings and I don't have to worry about all that call forwarding hassle. When they invent a Vonage service that I can walk down the street with I might be interested.
[ link to this | view in thread ]
Whatever he said, 2 Aug 2006 @ 9:28am

Almost tried it, but I would have had to upgrade my home's alarm system to some half-ass cellular system for $300, or have both Ma Bell and Vonage.

Between emergency and internet services, TiVo (I know it can use the net), home security alarms, Realtor keys, and other things I'm sure I have missed, VoIP just isn't practical for average families -- today.
[ link to this | view in thread ]
KevinG79, 2 Aug 2006 @ 10:38am

Re: Quit This Shit!!
So Vonage is having trouble. So what? Vonage is still better than any other service out there. Why does the media try and undermine Vonage? It's clear to me that there is big money behind this mudslinging! They hate Vonage because it works and it costs almost nothing compared to the phone companies. Instead of bagging them all the time, look at what Vonage is doing right. They are flipping the finger at the status quo...I love it!

br>I totally agree!

And no, Anonymous Coward, I do not work for Vonage and I am not "planting" advertisements here. I was a satisfied vonage customer who enjoyed getting unlimited LD for dirt cheap. Just cause I hate big greedy monopolies (i.e. AT&T) doesn't mean I'm working for Vonage... Moron.
[ link to this | view in thread ]
SMB, 2 Aug 2006 @ 12:28pm

Re: Re: Vonage is ok, but I want more
I'm not sure what you mean. Every one of those features lies between Vonage and my house, and has nothing to do with the phone company's switches (well, other than data delivery, which is moot. I _think_ the internet is still neutral...) Some of them lie between one port on my router (to my phone) and another (to my desktop).

At the point that Vonage takes the analog data and encodes it for streaming to my house, they have a whole lot of control, and can add as many features as they (I) want.
[ link to this | view in thread ]
jeff, 9 Aug 2006 @ 2:52pm

My only complaionts about Vonage is not having my name on outgoing caller ID, and their tech reps are impossible to understand
[ link to this | view in thread ]
michael P, 14 Jan 2007 @ 1:50pm

We hate Vonage
They lie to get you to sign up and then don't care about their service after that. Any one who uses vonage is a fool.
[ link to this | view in thread ]
ned, 17 Jan 2007 @ 2:59pm

My Very Bad expirience with Vonage
It’s a long Story of Suffering with “VONAGE” :

1st when I made the order and I spoke with customer service / Sales they woke me thought the process and they show me a silky way and services, they said I m free to disconnect the service with no penalty and they are a company totaly different from the others they don’t put you on a plan not like the companies we have here in the US, oh it wasn’t true all was I big lie

2nd I order a plan with $14.99 a month they put on my account a $24.99
I called them to fix it , they charge me $9.99 for a mistake they made

3rd the number I received in November -04-2006 ,it wasn’t working I called the customer service so they cannot fix the problem after couple days the telephone number they provided me with ,I discovered that you can make an outgoing calls no incoming calls the incoming calls go to a voice mail for a lady a totally different person??!!

again I called them and I reach somebody in India or Philippine and they promise to fix the problem , after couple days nothing happened I called and they said they fixed also nothing happened

Finally I reached I think somebody here in the US and they said I need to call the billing department the only solution to get another new brand line that the number they gave me belong to another customer they move to another company …??!! I did that and I called and they gave me a new number on November 29-2006 after one month of suffering

4th I start using the new number always bad quality with the voice and when ever you call international ( this the main reason why I’ve got VONAGE ) if you don’t reached where you are calling even if the other party didn’t answer or you didn’t reach there voice mail charge you 1 minute to 4 minute for this calls !!!

Due to all this suffering and long and hard process and unprofessional treatment and bad customer service and always Customer service when ever you ask them to do something they answer “ we don’t have the authority and also we are not a US telecommunication Company so we don’t go by the rules ??!!!

I decide to disconnect my service and return my device witch I paid for $159 And I don’t need it no more as of December -19- 2006 less than one month of in service, they came and they charge me disconecting fees for $49 and 40$ for my divice and they dont want to take back the divice

what kind of company or where are coming from , i dont know yes its the worst company i ever had
[ link to this | view in thread ]
Jenn, 31 Jan 2007 @ 12:07pm

Maybe some of you need to understand!
Vonage offers great service and yes a great price, I wont say all of their costumer support is the best but compared to when you call another phone company (Comcast, Verizon...these are the worst) They are helpful and they have technicians that are out of this world!

HELLO PEOPLE we are moving up in the world with technology and I think the "consumers" need to follow. People are so afraid of the phones going out, well hello vonage has network reliability and how often does your landline go out..REALLY better put how many people in the world use phones with a cord? Or do we all use cordless well what happens to a cordless when the power goes out, duh!

Now if this whole VOIP is such a bad thing then why are all the companies trying to keep up with them? Yea you could use skytype but do you get the same service or features or how about the fact that you can bring it anywhere!

Most of us go on vacation and use our cell phones with roaming, well take your box plug it in at the motel and done!

They also just came out with V-Access. I wont even go into all the cool things you can do with this, AND YES IT IS FREE! Read about on their webpage not from your buddies.

I have had vonage for 3 years with excellent service, the few times I did have trouble guess what I called them spoke to a tech got a free month for my issues and done.

This whole world needs to educate themselves before they speak.
[ link to this | view in thread ]
Donnie Dryden, 5 Feb 2007 @ 6:12pm

Vonage Sucks!!!!
I could get better service with two tin cans and a string. They strung me along until my 30 day trial period was over and then tried to charge me $95 to cancel the (service). I guess it would be worth it to get rid of them.
[ link to this | view in thread ]
Anonymous Coward, 17 Apr 2007 @ 6:57pm

Re: It's so easy.....
Wholesale might be the way to go...but I doubt it - you have to be able to guarantee different levels of quality of service at that level. Impossible...
At the end...it all comes back to the last mile. Cable was able to break through, but that's as far as you go...let's see where WiMax takes us...will the satellite communications see its rebirth with Wimax?
dis
[ link to this | view in thread ]
anonymous, 19 Apr 2007 @ 3:21pm

When will Vonage go belly up?
If I had a dime for each miniute I wasted with Vonage customer service, I would be RICH !
[ link to this | view in thread ]
toni, 21 Apr 2007 @ 10:55am

lousy service
disconnected my service including my dsl which i needed to usethere service they rubber neck on another provider cost me reconnect service plud inconveince of having to get a new number and no phone service look else where for low rates chicken shit company
[ link to this | view in thread ]
Hoodeetch, 26 Apr 2007 @ 12:18pm

Check Our User Reviews
For those of you who wonder why Vonage is so disliked, check our the user review on Cnet and Amazon, to name a couple.

Average user rating on Cnet is 3.4 out of 10, 10 being the best rating. Time after time, users complain of being billed for service after they've cancelled, awful tech support and bad connections.

You can run all the numbers you want about their financial condition; the fact is this is a horrible company that should be put out of business today.
[ link to this | view in thread ]
Hoodeetch, 26 Apr 2007 @ 12:25pm

Addendum to previous message.
The comments about poor service, dishonest billing, lousy tech support and bad connections also apply to my personal experience with these crooks. I have charges of nearly $200 on my VISA for a "Risk Free" trial I used for about three hours.
[ link to this | view in thread ]
patrick dillon, 9 May 2007 @ 8:56am

over charges
they mislead me on the phone and charged me much more than I anticipated. Then charged me $11.11 to change my plan to a lesser service level. I think they are a bad company.
[ link to this | view in thread ]