Analysis: ISPs Are Going To Eat Vonage's Lunch

Posts: 276

http://www.extremetech.com/article2/0,1697,1981807,00.asp

Posts: 42 · Full Forum Member Joined: Jun 27, 2005 Posts: 42

Thats very interesting! My cable company (Insight Communications) is coming out with VoIP sometime where I live but if its anything like there digital cable and internet (which I currently use both) then it will be crap.

Posts: 409 · Posted: Tue Jun 27, 2006 9:19 pm Post subject:

How can a Voip provider leach off a high speed access that I paid for.

It is a service running off a service that I have paid for.

Nothing wrong with that as far as I can see, just saving me some money.

I was offered my isp's digital phone service but the rate was almost double what I am paying for.

Posts: 42 · Full Forum Member Joined: Jun 27, 2005 Posts: 42

maryjane what does your cable companys VoIP bandwidth use? Does it have a bandwidth saver like Vonage? Just wondering since I figure Insight will probably have about the same thing.

Posts: 409 · Posted: Tue Jun 27, 2006 9:39 pm Post subject:

jlahmeyer wrote:

maryjane what does your cable companys VoIP bandwidth use? Does it have a bandwidth saver like Vonage? Just wondering since I figure Insight will probably have about the same thing.

I don't use it so I don't know.

Posts: 1715 · Posted: Wed Jun 28, 2006 12:34 am Post subject:

The cable co's VoIP usually uses a different data channel on the integrated modem/VoIP box that they install at your location. This still goes out over the same coaxial network that everything else goes over, BUT with higher priority. Also, because of the way these things work, you're not going to be able to take it with you when you travel, etc.

Posts: 1424 · Posted: Wed Jun 28, 2006 7:11 am Post subject:

VonageTPA wrote:

The cable co's VoIP usually uses a different data channel on the integrated modem/VoIP box that they install at your location. This still goes out over the same coaxial network that everything else goes over, BUT with higher priority. Also, because of the way these things work, you're not going to be able to take it with you when you travel, etc.

Well, same cable but different RF channel so the data traffic is separate, not prioritized. Same result.

A comment on the subject of this thread. ISPs don't have a huge price advantage over Vonage. They are subject to local franchise regulations that tack on 5-10% to the total bill. They also have a smaller customer base and have their hands in more pies. Vonage on the other hand does incur some costs from having to use CLECs for termination.

ISPs can compete on service, since they provide more expensive equipment and install it themselves, but Vonage wins hands down in features because of this same reason.

No one is eating anyone else's lunch today.

from the article wrote:

there is nothing in their technology that larger providers can't already do, and do more cheaply

This statement alone negates any valid points the author makes. It is ignorant to dismiss the advantage Vonage has by not having a legacy POTS network (and its associated costs) within a fixed geographic region and regulations preventing them from competing in certain areas. The author of this article neglects all of the non-POTS features that Vonage currently offers that it would take the ISPs time and effort to establish, including relationships with ILECs and CLECs in other geographic areas.

Posts: 276 · Posted: Wed Jun 28, 2006 12:11 pm Post subject:

scerruti wrote:

A comment on the subject of this thread. ISPs don't have a huge price advantage over Vonage. They are subject to local franchise regulations that tack on 5-10% to the total bill. They also have a smaller customer base and have their hands in more pies. Vonage on the other hand does incur some costs from having to use CLECs for termination.

ISPs can compete on service, since they provide more expensive equipment and install it themselves, but Vonage wins hands down in features because of this same reason.

No one is eating anyone else's lunch today.

Well, to be fair, the author didn't try to say that anyone was eating their lunch *today*, he said they are going to in the future. I posted the article link without any comments myself, and am interested in the discussion it generates, both pro and con here. I tend to agree with at least some of what the author says though, and additionally, I've come to believe that there's another HUGE reason that they'll likely eat Vonage's lunch in the future, and that's because Vonage's customer service is *so* completely abysmal, that it appears they have nothing but contempt for their existing customer base.

Over the last 6-9 months, I've gone (quite reluctantly) from a huge (and enthusiastic) Vonage supporter, to lukewarm, to the point I'm at today - which is I'd never recommend Vonage to another friend or family member, and as soon as there is a viable, reliable alternative there who cares about the customer and actually has REAL customer service, I'll likely be gone from Vonage, never to return. I'm sure my experience is far from unique, and I'm afraid that's a huge reason why there's a very good chance Vonage will fail, at least in my opinion.

I started having a significant problem with my Vonage lines about 2 months ago, and its not fixed today. In the meantime I've spent at least 20 hours on the phone with Vonage, of which at least 50% is hold time. They NEVER follow through on commitments to call me back, have openly lied to me at least a couple times during the process, have continued to charge my account for things they promised not to charge it for, etc etc etc.

*IF* your Vonage service is working flawlessly, then life is good. God forbid you ever have a problem though, because if you do, you're basically screwed. Customer service is atrocious, and the attitude that comes across clearly is that corporately, they just don't care!

The more that word gets out about the atrocious service, the worse shape they'll be in. Its much more difficult to repair an awful reputation than it is to acquire one in the first place. ISP (or other) competitors don't have to match or beat Vonage's price to begin to eat their customer base. They only have to provide a superior product at a price not too much above Vonage, and still a lot cheaper than the POTS lines they're replacing. To me, spending an extra $10/month for my personal line would be a no-brainer decision for reliable service with good support. $10/month isn't a *huge* deal for many, particularly in tradeoff for much better service levels, but to a VoIP provider, that would provide a revenue stream per client fully 40% greater than Vonage gets, which would be huge. $120 extra per year for my line, divided by the 20 hours I currently have had to spend on this current problem (and its NOT solved yet!) works out to $6/hr, and trust me, my time is worth a WHOLE lot more than that.

scerruti wrote:

from the article wrote:

there is nothing in their technology that larger providers can't already do, and do more cheaply

This statement alone negates any valid points the author makes. It is ignorant to dismiss the advantage Vonage has by not having a legacy POTS network (and its associated costs) within a fixed geographic region and regulations preventing them from competing in certain areas. The author of this article neglects all of the non-POTS features that Vonage currently offers that it would take the ISPs time and effort to establish, including relationships with ILECs and CLECs in other geographic areas.

Stephen, with all due respect, I strongly disagree with your statement that its ignorant of the author and negates anything he says. First, MY ISP is a cable provider, and has NO legacy POTS network. Second, even for the incumbent phone company, a VoIP service is a new service offering, very likely a totally new P&L center, and will stand or fail on its own, regardless of what costs are involved with a completely different P&L - the legacy POTS offering. Besides, unless you're trying to argue that the existing carriers are actually at or near the point of running their existing POTS infrastructure at a (current cash flow) loss, then those operations are an asset to help fund new offerings like VoIP. Will VoIP offerings eat into their POTS base? Sure, just like Vonage eats into their POTS base. But there's a saying I've heard many times over decades in the business world, and its a statement that good companies don't forget - its MUCH better to obsolete your own product than to wait and let someone else do it for you.

Posts: 94 · Vonage Forum Senior Joined: Jun 17, 2006 Posts: 94

DallasFlier wrote:

scerruti wrote:

A comment on the subject of this thread. ISPs don't have a huge price advantage over Vonage. They are subject to local franchise regulations that tack on 5-10% to the total bill. They also have a smaller customer base and have their hands in more pies. Vonage on the other hand does incur some costs from having to use CLECs for termination.

ISPs can compete on service, since they provide more expensive equipment and install it themselves, but Vonage wins hands down in features because of this same reason.

No one is eating anyone else's lunch today.

Well, to be fair, the author didn't try to say that anyone was eating their lunch *today*, he said they are going to in the future. I posted the article link without any comments myself, and am interested in the discussion it generates, both pro and con here. I tend to agree with at least some of what the author says though, and additionally, I've come to believe that there's another HUGE reason that they'll likely eat Vonage's lunch in the future, and that's because Vonage's customer service is *so* completely abysmal, that it appears they have nothing but contempt for their existing customer base.

Over the last 6-9 months, I've gone (quite reluctantly) from a huge (and enthusiastic) Vonage supporter, to lukewarm, to the point I'm at today - which is I'd never recommend Vonage to another friend or family member, and as soon as there is a viable, reliable alternative there who cares about the customer and actually has REAL customer service, I'll likely be gone from Vonage, never to return. I'm sure my experience is far from unique, and I'm afraid that's a huge reason why there's a very good chance Vonage will fail, at least in my opinion.

I started having a significant problem with my Vonage lines about 2 months ago, and its not fixed today. In the meantime I've spent at least 20 hours on the phone with Vonage, of which at least 50% is hold time. They NEVER follow through on commitments to call me back, have openly lied to me at least a couple times during the process, have continued to charge my account for things they promised not to charge it for, etc etc etc.

*IF* your Vonage service is working flawlessly, then life is good. God forbid you ever have a problem though, because if you do, you're basically screwed. Customer service is atrocious, and the attitude that comes across clearly is that corporately, they just don't care!

The more that word gets out about the atrocious service, the worse shape they'll be in. Its much more difficult to repair an awful reputation than it is to acquire one in the first place. ISP (or other) competitors don't have to match or beat Vonage's price to begin to eat their customer base. They only have to provide a superior product at a price not too much above Vonage, and still a lot cheaper than the POTS lines they're replacing. To me, spending an extra $10/month for my personal line would be a no-brainer decision for reliable service with good support. $10/month isn't a *huge* deal for many, particularly in tradeoff for much better service levels, but to a VoIP provider, that would provide a revenue stream per client fully 40% greater than Vonage gets, which would be huge. $120 extra per year for my line, divided by the 20 hours I currently have had to spend on this current problem (and its NOT solved yet!) works out to $6/hr, and trust me, my time is worth a WHOLE lot more than that.

scerruti wrote:

from the article wrote:

there is nothing in their technology that larger providers can't already do, and do more cheaply

This statement alone negates any valid points the author makes. It is ignorant to dismiss the advantage Vonage has by not having a legacy POTS network (and its associated costs) within a fixed geographic region and regulations preventing them from competing in certain areas. The author of this article neglects all of the non-POTS features that Vonage currently offers that it would take the ISPs time and effort to establish, including relationships with ILECs and CLECs in other geographic areas.

Stephen, with all due respect, I strongly disagree with your statement that its ignorant of the author and negates anything he says. First, MY ISP is a cable provider, and has NO legacy POTS network. Second, even for the incumbent phone company, a VoIP service is a new service offering, very likely a totally new P&L center, and will stand or fail on its own, regardless of what costs are involved with a completely different P&L - the legacy POTS offering. Besides, unless you're trying to argue that the existing carriers are actually at or near the point of running their existing POTS infrastructure at a (current cash flow) loss, then those operations are an asset to help fund new offerings like VoIP. Will VoIP offerings eat into their POTS base? Sure, just like Vonage eats into their POTS base. But there's a saying I've heard many times over decades in the business world, and its a statement that good companies don't forget - its MUCH better to obsolete your own product than to wait and let someone else do it for you.

Thanks for the honest comments. I find your comments important since I have never needed customer service. I can imagine how frustrated it is to not get help when you have been a constant supporter of the company.

I think that customer service is the hardest thing for Vonage to provide. If you don't need it, then everything is great. If you need it and can't get it, then you want to get rid of Vonage yesterday. The question from an investment point of view is how many customers have needed adequate customer service and didn't get it. Is it .5% or is it 12%. I have no idea. i have never needed to talk to anybody at Vonage and that is why I have never thought about switching the service. In fact I have gotten 3 of my family members to switch from VZ and BLS.

I hope you have solved your problem. Could it be that your ISP is at fault?

Posts: 1424 · Posted: Wed Jun 28, 2006 2:45 pm Post subject:

DallasFlier wrote:

scerruti wrote:

from the article wrote:

there is nothing in their technology that larger providers can't already do, and do more cheaply

This statement alone negates any valid points the author makes. It is ignorant to dismiss the advantage Vonage has by not having a legacy POTS network (and its associated costs) within a fixed geographic region and regulations preventing them from competing in certain areas. The author of this article neglects all of the non-POTS features that Vonage currently offers that it would take the ISPs time and effort to establish, including relationships with ILECs and CLECs in other geographic areas.

Stephen, with all due respect, I strongly disagree with your statement that its ignorant of the author and negates anything he says. First, MY ISP is a cable provider, and has NO legacy POTS network. Second, even for the incumbent phone company, a VoIP service is a new service offering, very likely a totally new P&L center, and will stand or fail on its own, regardless of what costs are involved with a completely different P&L - the legacy POTS offering. Besides, unless you're trying to argue that the existing carriers are actually at or near the point of running their existing POTS infrastructure at a (current cash flow) loss, then those operations are an asset to help fund new offerings like VoIP. Will VoIP offerings eat into their POTS base? Sure, just like Vonage eats into their POTS base. But there's a saying I've heard many times over decades in the business world, and its a statement that good companies don't forget - its MUCH better to obsolete your own product than to wait and let someone else do it for you.

I don't see where you are disagreeing with my statement. The author's premise is that ISPs can do anything Vonage can do at less cost.

He fails to point out why the ISPs can offer it cheaper, only pointing out that their advertising costs would be less. He disregards features that cable companies can not offer to customers that Vonage can. He fails to take into account local franchise fees and taxes that can add significantly to ISP bills. He neglects the issue that Vonage is already an international company and that that has direct benefits for customers.

One other big point he missed is that cable companies and telephone companies are locked in a battle with each other offering video, voice and data. They don't have the time or resources to worry about Vonage for the near future.

The issue that remains is can Vonage do anything to protect themselves from the eventual conversion to VoIP by the major ISPs? Yes, namely they can continue to grow their customer base so that geographically limited attacks can be avoided with special promotions offered when a user attempts to terminate. And they can grow geographically, especially internationally, to extend their reach beyond that of these US centric ISPs.

Everyone with a blog has been saying that anyone can build a VoIP network. That's true, but actually running a business, getting custom hardware built and in the stores, picking target markets, dealing with regulatory issues, those are the reasons why Vonage has grown so much faster than the other VoIP players. Dismissing what they have done based on the technical requirements is OK for people who build their own Asterisk server, but it isn't good business sense.

My experience with support mirrors yours (first recommending Vonage, later keeping my mouth shut). However, the single biggest thing that Vonage can do to fix the problem is, in fact, being done. Go to Vonage's web site and look at how many cities are now covered by their professional installation program. It is likely that Vonage installers will become as plentiful as DirecTV installers. This first line of customer support will resolve most issues before they ever hit Vonage customer support.

There is one customer support feature that T-Mobile has that I would love to see Vonage adopt. If you call in and wait times are long then you can enter a phone number and the system will call you back when your turn in line comes up.