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|*'''Online Account Management''': Vonage offers online options such as real-time feature management, call forwarding options and a lifetime call activity log.||*'''Online Account Management''': Vonage offers online options such as real-time feature management, call forwarding options and a lifetime call activity log.|
|*'''Personalized Web-Enabled Voicemail''': Customers can access their voicemail messages through an audio file sent to their email account. Vonage customers are also able to check their voicemail online or from a touchtone phone.||*'''Personalized Web-Enabled Voicemail''': Customers can access their voicemail messages through an audio file sent to their email account. Vonage customers are also able to check their voicemail online or from a touchtone phone.|
|====Premium Features (additional charge)====||====Premium Features (additional charge)====|
|*'''Virtual Phone Number''': Customers can pay an additional fee to have a second number ring on their primary line. These different numbers can have different area codes, which allows customers to receive calls from people in different areas of the country without those callers incurring long distance charges. In addition to U.S. area codes, Vonage also offers virtual phone numbers from Canada, France, Italy, Ireland, Mexico, Spain, and the UK.||*'''Virtual Phone Number''': Customers can pay an additional fee to have a second number ring on their primary line. These different numbers can have different area codes, which allows customers to receive calls from people in different areas of the country without those callers incurring long distance charges. In addition to U.S. area codes, Vonage also offers virtual phone numbers from Canada, France, Italy, Ireland, Mexico, Spain, and the UK.|
Vonage Holdings (NYSE:VG) is a leading provider of voice over Internet protocol (VoIP) telephone services in the U.S., with over 2.2 million subscribers. Through monthly service plans, customers can utilize many features that are not available on traditional telephone lines at little or no additional charge. Despite its significant number of customers, Vonage has seen increasing net losses for the past three years and is facing numerous lawsuits involving its initial public offering (IPO) and patent infringement. Vonage competes with traditional phone companies as well as cable companies, who are becoming more prevalent in the telephone industry.
Vonage is a leading provider of broadband telephone service. Their Voice over Internet Protocol (VoIP) technology allows for inexpensive communications similar to traditional telephone service. At the end of 2006 Vonage had 2.2 million subscribers. Vonage offers a number of service plans to subscribers, each with features similar to (and in some cases beyond) those available through traditional phone line services.
Vonage provides subscribers with some features that are not available on standard telephone lines. Many of these features come at no cost, while some require additional fees. All the Vonage calling plans include call waiting, caller ID, and call forwarding.
In June of 2006, Verizon Communications (VZ) brought a suit against Vonage for infringement on seven of Verizon's patents involving VoIP technology. Before the case went to trial in February 2007, Verizon dropped the suits on two of the seven patents. The jury concluded that Vonage infringed on three of the patents in question and awarded Verizon $58 million along with $1.6 million in pre-judgment interest.
In June and July of 2006, Vonage, many of its officers, and some underwriters of the Vonage IPO were listed as defendants in numerous law suits. The suits allege that people were harmed through acquiring Vonage stock in connection with the IPO. The claims state that Vonage omitted or otherwise misstated facts involving their IPO's Customer Directed Share Program. Some claims also allege that Vonage's IPO prospectus misrepresented some of their products as well as some of the past experience of their management. These cases have not yet been resolved.
Vonage's primary competition comes from traditional phone companies that have (in most cases) been in business for many years. These companies include: AT&T (NYSE: T), Qwest Communications (NYSE: Q) and Verizon Communications (NYSE: VZ). These companies are all much larger than Vonage and include many customers who don't have broadband internet access (and are thus unable to use Vonage) or are satisfied with their current provider. Furthermore, when Vonage customers make a call, the connection travels over these incumbent companies' "last mile" connections to reach the recipient of the call. For this service, Vonage pays their competitors directly. However, when a customer of one of these competitors calls a Vonage subscriber the incumbent phone companies pay nothing to Vonage. Below are some metrics that compare Vonage to major incumbent telephone companies.
|#of Access lines (000s)||68,786||46,950||14,283||2,200|
Source: Company Data
These companies include Cablevision Systems (CVC), Comcast (CMCSK), Cox Communications, and Time Warner Cable. These companies are investing increasingly in last-mile broadband connections and, as a result, positioning themselves to use these connections to increase their share of the telephone service market. Cable companies are marketing many of their products as package deals. In many cases, cable companies are now offering fixed monthly prices for a bundle of cable television, Internet access, and phone service. This bundling allows for often substantial cost savings, which can make the implied cost of cable phone service lower than the prices for Vonage's VoIP services. To remain competitive with these providers, Vonage relies on its unique features such as area code choice and portability.
Wireless service providers like AT&T, Sprint Nextel Corporation, T-Mobile USA, Inc., and Verizon Communications (VZ) have customers that utilize wireless phones as a replacement for a traditional phone line. These companies also provide wireless broadband Internet access and could potentially offer VoIP services in the future.