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News tagged: Vonage


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Several users have written in to note that Vonage is jacking up several fees for their VoIP customers. An e-mail sent to users informs them that the company's monthly "Emergency 911 and Information Services Fee" has been increased from $1.49 to $1.99. With the hike they're apparently including unlimited 411 calls, for all four of you who still use 411 instead of Google when at home looking for information.

The company also raised their "Regulatory, Compliance and Intellectual Property Fee" from $1.49 to $1.99. Like all "regulatory recovery" fees, this fee is pure nonsense: a vague, non-government mandated fee that allows carriers to raise prices with below the line fees that don't show up in the advertised price. By giving it a vaguely governmental-sounding name, carriers can subsequently infer that Uncle Sam is to blame for higher prices -- not the carrier.

"These under the line price increases have now pushed me to look around at other providers," says one user who has been with Vonage since 2005.

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Like the AOL of old, Vonage has cultivated quite a reputation as a company that often makes it incredibly difficult to actually cancel your service. The check for this behavior has finally come due, and it's likely considerably less than they made from the practice. According to an announcement posted to the website of Idaho Attorney General Lawrence Wasden, Vonage has agreed to pay $3 million in penalties to 32 states in order to settle an investigation into some of its business practices. The settlement also cites Vonage for failing to note their VoIP service needed broadband and then socking customers with cancellation fees, and for offers of "free" services that wound up charging a litany of activation and other fees.

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Vonage has unveiled their first quarter earnings which indicate the independent VoIP operator technically posted a profit for the first time ever. Vonage posted a net income of $5 million, up from a loss of $4 million one year ago. However, Vonage notes their earnings were boosted by a one time "$13 million mark-to-market adjustment relating to the derivative liability in the Company's convertible debt," without which the operator would have posted a net loss of $8 million. The Company lost 6,000 net subscriber lines, ending Q1 with 2.6 million lines in service. The killer for Vonage has always been customer defections or "churn," which jumped to 3.1% despite churn reduction being a company priority.

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Sure, we've given Comcast some grief over the years, but one thing that can't be denied is the speed at which the company absolutely dominated of the VoIP (sorry, Digital Voice) market. Today Comcast reached out to us to note that they're now the third largest residential phone company in the United States, only behind AT&T and Verizon.

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We were recently the first to report that the FCC was concerned that Comcast's new de-prioritization system would degrade competing VoIP traffic, the agency writing a letter asking Comcast to explain how this wasn't anti-competitive, and why they hadn't previously mentioned the system's impact on VoIP. The new, protocol agnostic system was deployed late last year, after our users discovered Comcast was forging TCP packets in order to slow P2P traffic for all users -- a practice that resulted in an FCC investigation, and a rather toothless "sanction."

Comcast's new system temporarily de-prioritizes the traffic for customers who meet two criteria: they're on a congested node, and they have been using 70% or more of their assigned upstream or downstream throughput for more than fifteen minutes.

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Yesterday we reported that the FCC was suddenly concerned about how Comcast's new network management system treats independent VoIP operators. As previously discussed, the new system temporarily de-prioritizes the traffic for customers who meet two criteria: they're on a congested node, and they have been using 70% or more of their assigned upstream or downstream throughput for more than fifteen minutes.

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While a lot was made of the FCC's investigation and Comcast's shift to a "protocol agnostic" network management system, the FCC order didn't actually punish Comcast, came with no fine, offered no new guidelines, didn't request they do anything they didn't plan to do voluntarily, and might not even be enforceable in court. Still, Comcast has voluntarily changed from a system that throttled upstream P2P traffic for all users, to a new 250GB monthly cap and a new "protocol agnostic" de-prioritization system -- which we first profiled back in September.

The new system de-prioritizes a user's connection if a particular CMTS port is congested, and if that user has been identified as a primary reason why.

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Comcast has been signing up a ridiculous number of VoIP customers each quarter (half a million in Q3), and has very quickly become the nation's fourth largest phone carrier. Not only are they the biggest VoIP provider, they offer the highest quality calls, according to a new study (pdf) by Keynote Competitive Research.

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Back in July, Vonage tagged former AT&T (technically Cingular) executive Marc Lefar to be the company's new CEO, replacing Vonage founder and interim CEO Jeff Citron, who was playing the role since April 2007. Lefar's primary job was to reduce customer defections, by improving the "customer experience." However, according to Vonage's third quarter earnings, while the company did narrow their net loss on the quarter, the company's "churn" or turnover rate remains unchanged at 3%. At that rate, Vonage is forced to replace a third of their customer base every year. In the third quarter Vonage added just 9,500 subscribers (for a little perspective, Comcast added half a million).

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An economic slow down will hit some companies harder than others, and one company that could be in trouble is Vonage. According to intelligence firm Telecom Web (also see discussion in our forums), the $253 million in survival loans Vonage thought they had secured back in July isn't a sure thing, and for the third time, the VoIP carrier extended the tender offer for its outstanding loans needed to close on the new loans. "Those outstanding loans are due on Dec. 16, and if Vonage can’t pay them off, the company will in all likelihood be forced into bankruptcy," claims the firm. Obviously loan terms are even stiffer now, meaning Vonage's survival is even more unsure.

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Vonage has picked former AT&T (technically Cingular) executive Marc Lefar to be the company's new CEO, replacing Vonage founder and interim CEO Jeff Citron, who has been playing the role since April 2007. Lefar has also worked at Verizon Wireless, GTE Wireless and Proctor and Gamble. "Moving forward, we will continue to improve the customer experience from end to end," says the new boss in a prepared statement. Given a third of Vonage's customers defect and need to be replaced each year, reducing churn is Lefar's biggest job in a market that's now dominated by large cable incumbents offering triple play bundle discounts.

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