Rate Increase

Posts: 433 · Posted: Thu Dec 04, 2008 12:23 am Post subject:

I'm a little shocked. I can't believe they are raising the rates for existing customers. I agree that it isn't fair to lock someone into a contract and then be able to raise the price on them. Even the cell phone companies don't do that. There has to be a way to let people out of their contracts if they don't agree to the price increase. I'm still curious to see what happens to my account. I pay $14.99 a month but it is the promotional unlimited step up plan. I thought I would be safe but now I'm not so sure.

Posts: 229 · Posted: Thu Dec 04, 2008 12:54 am Post subject:

I'm pretty sure that we'll see a couple of complaints lodged with a state attorney general's office if a <2 yr customer is issued a cancellation fee due to the price increase.

Posts: 16 · Vonage Forum Associate Joined: Sep 25, 2008 Posts: 16

OMGGGGG!!! say it ain't so Confused

Gimme a break!! YES Vonage will increase the rate from 14.99 to 17.99 FOR EVERYONE!! good luck getting at&t to beat that... Everyone with Vonage be sure to call and complain.. I know thats what I want for Christmas Lol

Posts: 229 · Posted: Thu Dec 04, 2008 6:08 am Post subject:

If you are reading this and still don't understand why this is bad, here's a reason:

One of Vonage's competitors (another Voip provider, not a cableco or telco) is offering unlimited service with nearly all of the features that Vonage offers for $199/year, one-year contract required. You pay the year up-front, but it breaks down to $16.58/mo. For a limited time, if you buy one year of service they will give you a second year of service for free. Over 24 months that would be $8.29/mo. They also give you a 2nd phone extension.

So at a time when Vonage's competitors can offer twice the service for half the price of Vonage's 500 min/mo plan, Vonage is raising rates. This coming on the heels of Vonage's SEC statements which show that Vonage made a profit in the last quarter and has a restructured debt package which will allow it to continue to make a profit while paying down debt. Last quarter Vonage reported that the average cost of services per subscriber is $7.20/mo. For the 500 min/mo plan Vonage was making a profit of $7.79 per customer. This will now push that profit to $10.79 per customer without giving those customers any additional value for their service.

It may, however, pay for more television and online advertising. In this past quarter Vonage spent $65 million in marketing expenses to bring in 9500 new customers. That's a shocking $6842 PER NEW CUSTOMER. Compare that to 4th Quarter 2007 when Vonage spent $61 million to bring in 56,000 new customers - $1089 per new customer. In fact, Vonage has spent $193 million in fiscal 2008 to bring in 44,500 new customers. Compare this to 3rd quarter 2007 when Vonage spent $222 million for 323,000 new customers. In Fiscal 2007 the average cost of converting over a new customer was $744, sofar for Fiscal 2008 it is $4337 per customer.

If you still don't understand all that gibberish, here's the bottom line: Vonage is going to spend almost as much money this year on advertising as they did last year, but sofar their growth has fallen nearly 700%. Unless Vonage can find 311,000 new customers between now and December 31, Vonage will have blown a LOT of money ($258 million) for very little return.

Posts: 831 · Vonage Forum Evangelist Joined: Jun 08, 2007 Posts: 831

kamnet wrote:

This coming on the heels of Vonage's SEC statements which show that Vonage made a profit in the last quarter.

Actually Vonage lost $8 million last quarter, but made $15 million from operations only (before advertising and marketing.)

It is true that Vonage's marketing cost per new customer is and has alway been high, over $200.00. If you read or listen to the earnings call, you will note that the advertising program is being revamped.

BTW, Vonage brought in 238,400 new customers, but with churn only had a 9,460 net increase. Marketing cost per gross subscriber line addition was $272.24.

Is Vonage a price leader or follower, which to me is the more important question. It will be interesting to see what their "stronger" competitors do in light of this increase.

Posts: 350 · Vonage Forum Evangelist Joined: Dec 04, 2005 Posts: 350

kamnet wrote:

One of Vonage's competitors (another Voip provider, not a cableco or telco) is offering unlimited service with nearly all of the features that Vonage offers for $199/year, one-year contract required. You pay the year up-front, but it breaks down to $16.58/mo. For a limited time, if you buy one year of service they will give you a second year of service for free. Over 24 months that would be $8.29/mo. They also give you a 2nd phone extension.

If you go to said competitors forum on another website you'll find that even the die-hard supporters are now saying that the constant service problems are becomming too much to handle. This is a change from the general consensus that the low price mitigates the service problems ("it doesn't work all the time but at least the price is low").

I certainly don't know about you, but I don't have those problems. To use the slogan from Mr. Poppel, you can "set it and forget it". I moved into my current residence about a year and a half ago, set up my TA and have never had a problem. It might be about $10 more that "that other guy' (Vonage also has an unlimited plan which brings the price to around $20 / month -- making the difference less) but the service working and not having to keep fiddling with is well worth it.

Posts: 229 · Posted: Thu Dec 04, 2008 2:19 pm Post subject:

trekologer wrote:

If you go to said competitors forum on another website you'll find that even the die-hard supporters are now saying that the constant service problems are becomming too much to handle. This is a change from the general consensus that the low price mitigates the service problems ("it doesn't work all the time but at least the price is low").

True, there are always people who discuss how the service isn't to their liking, and how they constantly have this issue or that, or never got the service to work, and that customer service is a joke. Just a quick look over the forums here could easily lead a new individual to believe Vonage is mostly junk, rife with problems and not worth switching away from their local telco just to save a few dollars. The further out you stray on the Internet, the worse the talk about Vonage sounds.

Quote:

I certainly don't know about you, but I don't have those problems. To use the slogan from Mr. Poppel, you can "set it and forget it". I moved into my current residence about a year and a half ago, set up my TA and have never had a problem. It might be about $10 more that "that other guy' (Vonage also has an unlimited plan which brings the price to around $20 / month -- making the difference less) but the service working and not having to keep fiddling with is well worth it.

I agree, the only issues I've ever had with Vonage were related to the router/TA that I was sent, one just three months into my service and the other happening just last week (and still continuing, although I was promised that they've now fixed the issue by changing a setting in my router). Thus the main reason that I've never looked to switch from Vonage.

Posts: 229 · Posted: Thu Dec 04, 2008 2:21 pm Post subject:

ed56 wrote:

BTW, Vonage brought in 238,400 new customers, but with churn only had a 9,460 net increase.

Is that Q3 2008, or FY 2008?

Posts: 831 · Vonage Forum Evangelist Joined: Jun 08, 2007 Posts: 831

kamnet wrote:

ed56 wrote:

BTW, Vonage brought in 238,400 new customers, but with churn only had a 9,460 net increase.

Is that Q3 2008, or FY 2008?

Q3 2008

................................................Three Months Ended
......................................................September 30
..............................................................2008

Gross subscriber line additions.........238,430
Net subscriber line additions................9,460

see http://findarticles.com/p/articles/mi_m4PRN/is_2008_Nov_6/ai_n30974897/pg_3?tag=artBody;col1

Posts: 831 · Vonage Forum Evangelist Joined: Jun 08, 2007 Posts: 831

kamnet wrote:

trekologer wrote:

If you go to said competitors forum on another website you'll find that even the die-hard supporters are now saying that the constant service problems are becomming too much to handle. This is a change from the general consensus that the low price mitigates the service problems ("it doesn't work all the time but at least the price is low").

True, there are always people who discuss how the service isn't to their liking, and how they constantly have this issue or that, or never got the service to work, and that customer service is a joke. Just a quick look over the forums here could easily lead a new individual to believe Vonage is mostly junk, rife with problems and not worth switching away from their local telco just to save a few dollars. The further out you stray on the Internet, the worse the talk about Vonage sounds.

Quote:

I certainly don't know about you, but I don't have those problems. To use the slogan from Mr. Poppel, you can "set it and forget it". I moved into my current residence about a year and a half ago, set up my TA and have never had a problem. It might be about $10 more that "that other guy' (Vonage also has an unlimited plan which brings the price to around $20 / month -- making the difference less) but the service working and not having to keep fiddling with is well worth it.

I agree, the only issues I've ever had with Vonage were related to the router/TA that I was sent, one just three months into my service and the other happening just last week (and still continuing, although I was promised that they've now fixed the issue by changing a setting in my router). Thus the main reason that I've never looked to switch from Vonage.

The churn at Vonage is horrible, and supposedly they know why and are trying to fix it (see my post at http://www.vonage-forum.com/ftopic23461.html)

Still, I believe that the "value" customer, as Vonage calls them, will jump to a cheaper service at a drop of a hat, just as they jumped to Vonage (for the most part, these are the folks who complain about the cancellation fee.) Bundling by the cable companies has hurt as well. Additionally, the move to wireless for all of one's telecom needs seems to be continuing, hurting all of the wired services.