Re: Ruling May Be End for Vonage / Judge Enjoins Use Of Key Technology good financial analysis of

[David Farber <dave () farber net>]

Begin forwarded message:

From: DV Henkel-Wallace <dvhw () talima com>
Date: March 26, 2007 7:48:53 PM EDT
To: Daniel Berninger <dan () danielberninger com>
Cc: David Farber <dave () farber net>
Subject: Re: [IP] Ruling May Be End for Vonage / Judge Enjoins Use Of  
Key Technology good financial analysis of

Your facts don't affect the conclusion.

I haven't seen any numbers on customer exodus, but the fact is Vonage  
doesn't support porting numbers they've given you out (only in the  
case you happened to have ported a number in and haven't moved in the  
mean time).  This makes the customers more sticky, so most are  
presumably sitting tight hoping that POTS interconnect won't stop  
working in 10 days or so (I know that's my strategy).  But presume  
that the likely stays and appeals are exhausted: when people leave,  
the economics you describe will no longer apply.  And if there's any  
significant hiatus (more than, say, 24 hours) most people likely  
_will_ leave.  New subscribers?  I'm sure they've already dwindled to  
a trickle.

Sure, VOIP calls entirely outside the POTS network aren't affected,  
but I'd bet they're a tiny percentage of all VOIP calls (perhaps  
excluding Skype, of which more below).

The VOIP vendors, and Vonage in particular, have screwed themselves  
by doing nothing but underpricing ordinary phone service and by  
stupidly building non-open systems (the latter in the style of the  
the mobile companies).  VOIP could in theory offer all sorts of new  
products, but there's been precious little of that.  So at this point  
they are at the mercy of the courts.  And given how the RIM case  
played out, it's possible that Vonage _will_ be cut off.

If Verizon decides to go after others, Skype will slightly more  
resilient because they've portrayed themselves more as an IM service  
than a phone service, giving them a different demographic, and they  
have at least _tried_ to do something interesting with eBay pages.   
Surprisingly it's a hardware vendor, Shoretel, who is trying to move  
VOIP into slightly more interesting directions by hooking up with  
Salesforce.

Why don't I have a more seamless voice/SMS/etc experience across  
phone, mobile, laptop etc?   Why aren't voice widgets (including  
_incoming_ calls from handsets) adjunct to all sorts of web pages and  
ordinary applications?  It's because the Internet phone guys are  
basically old-skool POTS guys  with a veneer of TCP-hipness glued  
on.  Talk about lame.

-d



> From: Daniel Berninger <dan () danielberninger com>
> Date: March 26, 2007 7:54:52 AM EDT
>
> The injunction has zero prospect of killing Vonage.  People confuse  
> threats
> to stock valuation with threats to the company.  Stock valuation  
> threatens
> Vonage only to the extent the company needs to raise new capital.   
> Vonage
> has sufficient cash reserves to reach cash flow positive status.
>
> With respect to the permanent injunction, there does not exist a  
> patent on
> VoIP itself.  There exist a myriad of patents on aspects of  
> implementation.
> Judge Hilton may interpret everything in Verizon's favor, but the  
> nature of
> our legal system allows Vonage appeal to other judges.


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