Vonage

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Vonage Holdings Corp.
Type	Public (NYSE: VG)
Founded	January 2001 in Edison, NJ
Headquarters	Holmdel, NJ, USA
Key people	Jeffrey A. Citron; Chairman, Interim CEO, Chief Strategy Officer and Co-Founder John S.Rego; CFO Louis Mamakos; CTO
Industry	Communications services
Products	Voice over IP
Revenue	▲$607.397 million USD(2006)
Net income	▼-$338.573 million USD(2006)
Employees	1500+ Worldwide (2007)
Website	www.vonage.com

Vonage (NYSE: VG) (pronounced /ˈvɑːnɪdʒ/) is a publicly held commercial voice over IP (VoIP) network and SIP company that provides telephone service via a broadband connection (the company's name is a play on their motto "Voice-Over-Net-AGE").

Vonage promotes itself as "Vonage the Broadband Phone Company"^[1] in the U.S. and as "Leading the Internet Phone Revolution." Until recently Vonage held the most subscribers at nearly 2.6 million subscriber lines^[2], Comcast has now surpassed them, and has the most VOIP subscribers^[3]. Vonage has completed well over 5 billion calls.^{[citation needed]} Vonage has led the Voice over Broadband (VoBB), or Broadband Phone industry through its aggressive consumer marketing in the United States, Canada, UK and other countries globally.

Vonage was originally based in Edison, New Jersey but is now located in Holmdel, New Jersey, in a building previously occupied by Prudential.^[4] Vonage offers services to subscribers throughout the United States. The company expanded into Canada in April 2004 and into the United Kingdom in January 2005.

On April 12, 2007, Vonage CEO Michael Snyder agreed to step down as Chief Executive Officer and resign from the company's Board of Directors. In his place, Chairman and Chief Strategist Jeffrey A. Citron will serve as Interim CEO^[5] The company also announced plans for 10% (180) layoffs.^[6]

Contents 1 Initial public offering 2 Telephone number availability 3 Service Requirements 4 Emergency call issue 5 Verizon & other lawsuits 6 Service cancellation 7 Fax, alarm and TiVo/DSS compatibility 8 Vonage's early history as Min-X.com 9 See also 10 References 11 External links

[edit] Initial public offering

Vonage went public on May 24, 2006 at a price of $17 per share, and dropped 23.5% to $13 the following day. The closing price on 25 March 2007 was $3.00.^[7]

Prior to the IPO, Vonage solicited its customers^[8] via automated phone call announcements and emails with an offer to buy shares of the IPO. The price fell $2.15, or 12.7 percent, to close at $14.85 on the New York Stock Exchange: the worst trading day for any IPO in 2006 up to that point. The IPO raised $531 million for the company. Vonage's post-IPO handling of individual pre-IPO investors resulted in a class-action lawsuit^[9](pending March 2007), earning the Vonage IPO a Business 2.0 Magazine award as 14th of 101 Dumbest Moments in Business for 2006.^[10]

[edit] Telephone number availability

Subscribers are permitted to choose any number in the country of the service they subscribe to for their primary line. Whether it be Vonage US, Canada or UK, subscribers may choose from any area code regardless of their actual residence. Subscribers also have the option of obtaining additional "virtual numbers" for a monthly fee. For example, a subscriber in Florida may choose a number with Manhattan area code 646, allowing callers from New York to be billed only for a local call. In addition, Vonage also offers 'virtual numbers' in Mexico, Canada and throughout Europe for any and all customers to choose from. This is especially beneficial to businesses with an international client base. While Vonage supports porting a telephone number in the US via the FCC's Local Number Portability (LNP), Vonage does not offer phone numbers in every area code in the United States.

Although only residents of the US, Canada, and the UK may subscribe to Vonage (paying with a credit card from their respective nation), the routers with phone ports can be plugged into the internet anywhere in the world. For instance, a student studying abroad in Brazil plugs the router and phone into a cable internet service in the apartment or into an internet café that accepts notebook computers (LAN plug-ins), and the service works with the original local phone number and pricing. The student thus receives calls from and makes calls to the home country for no extra fee. International pricing is often so low that it can be cheaper than calling direct in the same country. For example, the Vonage price to Rio de Janeiro is USD$0.06/min (2005), but calling from a cell phone or pay phone in Brazil costs about USD$0.20/min. Vonage also offers a USB phone adapter (called a "V-phone ") that runs a softphone application on the computer, and with internet access, gives it a fully functional and portable telephone with access to the worldwide telephone network.

[edit] Service Requirements

In order to use the service, customers must purchase or use a "Vonage" branded "VoIP router" or a phone adapter that connects to their main router or broadband modem. In addition, an upload speed of 90–200 kbit/s as well as a reliable/QoS optimized connection is necessary to make calls without substantial lag or jitter. Your quality of service needs to be at or above 80. It is important to know that 90 kbit/s upload speed is the minimum needed for one line; if you have two lines then you would need 200 kbit/s to support a clear Vonage call. If you have a satellite dish for your ISP (internet service provider) make sure to test your speeds before you sign up. Satellite with upload speeds in the 4-5 hundreds still does not mean you can have a seamless transition to Vonage. Also with the dish QOS is more important, and needs to be right around 80. You can test your speeds at various sites on the internet; upload speed is the only thing you need to worry about.

[edit] Emergency call issue

A problem with any VoIP provider is that, since the physical location of a caller may not correspond to his or her listed phone number, traditional emergency telephone number service, such as 9-1-1 and e911 in North America, is not available. Vonage emergency phone service requires subscribers to register their address with the company and is not operative in case of an Internet connection disruption or power failure (unless a UPS is used to power the Vonage telephone adapter, telephone base unit, and modem). Customers are responsible for maintaining their 911 location information at all times.

In the event that a customer dials 911 prior to the 911 verification becoming complete, the call will usually be routed to a national 911 call center where a customer must supply basic information (name, location, nature of the emergency, etc.), after which the call will be transferred to a local public service answering point, like a local Police Department.^[11][12]

[edit] Verizon & other lawsuits

On 19 June 2006, Verizon filed a lawsuit charging that Vonage infringed on five of Verizon's patents related to its VoIP service. The patents describe technology for completing phone calls between VoIP users and people using phones on the traditional public switched network, authenticating VoIP callers, validating VoIP callers' accounts, fraud protection, providing enhanced features, using Wi-Fi handsets with VoIP services and monitoring VoIP caller usage.

On 8 March 2007 a jury found Vonage guilty of infringing three patents held by Verizon, and not guilty of infringing two other patents. The jury ordered Vonage to pay fifty-eight million dollars, and a royalty rate of 5.5% of every sale to a Vonage customer, back to Verizon. Subsequent to this jury award, there were a series of appeals and intermediate stays on payment. These appeals ended on 19 November 2007 with Vonage agreeing to pay ~$120 Million in damages^[13] to Verizon.

The Verizon patents brought to trial were the Voit^[14] patents: US patent 6430275, US patent 6137869, US patent 6104711, US patent 6282574, the Curry^[15] patent US patent 6359880, and the Gardell^[16] patents: US patent 6298062, US patent 6128304. The successful prosecution of Voit patents against Vonage led to their reuse by Verizon in another suit against Cox Communications initiated in January 2008^[17], as well as one against Charter Communications in Feb 2008^[18].

The Verizon suit was the first but not the only patent lawsuit successfully prosecuted against Vonage. By 26 December 2007, Vonage has also lost $80 Million to Sprint Nextel^[19] and $39 Million to AT&T.^[20] Another lawsuit with Nortel resulted in no monetary damages.^[21]

[edit] Service cancellation

Vonage requires customers to cancel service by calling a toll free number, as service cancellation is not available on-line. Customer descriptions of the cancellation process frequently involve hold times of approximately twenty-five (25) minutes, depending on call volume. Difficulties faced by customers when attempting to cancel Vonage were detailed in a May 2006 Wall Street Journal article^[22] which related one customer's experience with a Vonage representative who refused to cancel an account unless a repair attempt was allowed by the customer. In the last 12 month reporting period, the Better Business Bureau has closed 3687 complaints (as of Oct 2007). The balance of complaints centered on service, billing and refund issues.^[23]

Despite marketing their service as having no contracts or long term commitments, Vonage charges customers a fee for cancellation within the two years of service, changed from one year February 1st, 2007. This fee is noted in the provider's Terms of Service when a customer signs up or attempts to access their Web Account. The fee is $39.99 per physical voice line which is disconnected. This fee does not apply to dedicated fax lines, virtual telephone numbers, or the computer-based "SoftPhone" lines. A "Rebate Recovery" fee is also assessed if the account is canceled after the 30 day money back guarantee, but before 180 days of service. This fee is the "instant rebate" which is offered on the web site when signing up and is different for each device. This fee, if applied, protects the company from having bogus accounts signed up and canceled shortly thereafter for free or discounted routers that can then be sold for profit. It is the policy of Vonage to bill any customer who is discontinuing service-for any reason- even if the customer is unhappy with the quality of the service, they will still be billed $39.99.^{[citation needed]}

The customer, however, can avoid these fees if they cancel their account before the end of the money-back guarantee period, which sometimes varies between 30 days to 60 days, depending on their sign up terms and frequency of communication with Vonage Customer Service. Often, representatives will attempt to retain a customer by extending the money-back guarantee period. The customer is responsible for the cost of return shipping to Vonage upon cancellation of the account.

As of March 2007, FCC employees say that Local Number Portability rules do not apply to VoIP service providers such as Vonage. Vonage states though that subscriber numbers may be transferred to other companies, per Terms of Service^[24] (section 6.6). Vonage says that LNP transfers are handled by Focal Communications. However, Focal was acquired^[25] by Broadwing Corporation which itself was acquired by Level 3 Communications.^[26]

[edit] Fax, alarm and TiVo/DSS compatibility

There have been widespread reports of difficulty in operating Fax machines on Vonage lines, either dedicated Fax lines, or regular Vonage lines. Difficulties have also been reported with residential alarm systems and TiVo.^{[citation needed]}

When using a fax machine, it is suggested that users connect their fax directly into the VoIP adapter, regardless of the provider. This ensures the least amount of variables in a specific network setup. In addition, users should ensure that an "Error Correction Mode" or "ECM Mode" is disabled on their fax machines as this compounds problems and distortion regarding the compression, decompression, and transmission of data communications through a VoIP provider. Also the "Baud Rate" should be lowered to no more than "9600". When faxing the fax should be set to "Standard" instead of "Photo or Fine." It is important to note with faxing that your internet connection more than Vonage really dictates if you are going to be able to fax consistenly. There are also settings on the device such as codces, jitter buffer and rx tx gains that can be adjusted to improve Vonage faxing. All these things combinded make faxing with Vonage very close to faxing over a landline.

Vonage suggests that customers contact their local home alarm system operator to determine whether or not their existing home alarm solution is compatible with any VoIP provider. Vonage does not make specific recommendations about security systems.^[27] However, Vonage does specifically mention alarm.com as being compatible because it uses wireless technology rather than depending on a phone line.^[28]

TiVo's Series 1 units contain only telephone ports to connect to a wall jack. Series 2 and Series 3 hardware contains an ethernet jack, and optionally supports USB-based WiFi adapters, which typically do work properly with VoIP providers. At one point, the initial connection made by the TiVo unit required the use of a regular telephone landline prior to use with a broadband connection, but this limitation was removed in 2005 with TiVo version 7.2^[29].

[edit] Vonage's early history as Min-X.com

This article may require cleanup to meet Wikipedia's quality standards. Please improve this article if you can. (September 2007)

Vonage had its genesis in a company called Min-X.com ("The Minute Exchange"). Jeff Pulver, noted VoIP evangelist and owner of the successful VON conferences, incubated Min-X.com at his offices in Melville, NY on Long Island between December of 1999 and December of 2000. Based on his experience at the bond trading giant, Cantor Fitzgerald, Pulver knew that any commoditized product is easily traded in a market. The year was 1999 and Enron was at the zenith of its global trading business. (Enron at this point even had a bandwidth trading exchange.) There were a significant number of regional IP telephony companies spread across the globe with large amounts of gateway capacity that could be efficiently brokered for profit. Unlike Enron's bandwidth trading market, Pulver's market would be a market where IP Telephony minutes and capacity could be traded in both a spot and futures contracts. By summer of 2000, Min-X.com had about six employees who were either technologists or former bond or stock traders. There was a business plan and initial "trading platform" prototypes built on Cisco, Clarent and Vocaltec IP Telephony equipment. Unfortunately, Min-X did not have full time management leadership and despite the many pitches to VCs, the initial funding necessary to bootstrap the firm was just not there. It wasn't clear that Min-X would get farther than just an idea.^{[citation needed]}

Jeffrey Citron (the other Jeff) was coming off a year long vacation having been bought out of his position as CEO and majority shareholder at Datek Online and also with net worth of $750 million. He had been barred from stock trading by the SEC for life.^[30]

Daniel Berninger, noted VoIP pundit and analyst with Tier 1 Research, was working for Pulver in 2000, and was helping Pulver bootstrap various new businesses including MinX, Arieta and Free World Dialup. Dan's wife, an executive recruiter with a deep book, knew of Citron's availability and placed the call to Jeffrey. Citron's first imperson meeting with Pulver on the topic of Min-X happened in August of 2000. Citron was chauffeured to the meeting in Melville in his own helicopter. Pulver gave the pitch, while Citron, confident and exceedingly sure of himself, was piqued by the idea of starting a new and (more importantly) unregulated marketplace. By October 2000, a deal was struck and Citron invested roughly $10 million of the $12 million seed and took the title CEO of MinX.com. The convergence of so many important factors created a fantastic exuberance throughout the nascent company. ^[31]

Citron immediately brought in his trusted banker, Carlos Bhola and offered him the position of President. Bhola was one of Frank Quatrone's disciples from the internet banking group at CSFB and by 2000 Bhola had formed his own boutique investment banking advisory group. Bhola and his team joined the company and quickly got to work building a better business plan and revenue model for Min-X to raise more money.

Bhola's first conclusion was that an independent IP telephony minute trading marketplace was not going to stand on its own. Wholesale minute prices are priced in pennies. Brokerage commissions, as a percentage of the minute price would generate commissions in the fraction of a cent. Assuming that every regional IP telephony company joined the Min-X trading marketplace, the combined total of all the commissions generated on all the traded minutes from all the companies would not generate an attractive investment return. This calculation was true, even as growth in IP telephony was factored in. What was needed in this minute marketplace to spark exponential growth was a massive consumer of capacity who would perpetually buy minutes. "Min-X Enterprise Services," a company focused on selling IP voice services was born. Bhola and team, reran the numbers on the 2 new businesses. By November 2000, it became obvious that the really profitable business was "Min-X Enterprise Services" and not the Min-X marketplace. Efforts of all employees were refocused on building "Min-X Enterprise Services." In a December 2000 meeting in Pulver's green conference room, Citron unveiled a much more attractive name for the new entity; "Vonage." The name borrows Pulver's "VON" acronym for "Voice on the Net" and combines it with the temporal meaning of the word "age," heralding the start of new era for consumer phone service.

In January of 2001, after moving to 10,000 square feet (930 m²) of refurbished office space in the former Revlon building in Edison, NJ, Vonage was incorporated and commenced its ambitious plan. ^[32]

[edit] See also

• List of commercial voice over IP network providers
• Telephone

[edit] References

[edit] External links

• Official Site
• Official Canadian Site
• Official UK Site
• Vonage Forum — An Independent Support Site