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georgepan

join:2005-05-09
Wesley Chapel, FL

1 recommendation

SUNROCKET can't be profitable at $16.58 per month

SR is refreshingly different from other VOIP's, but I don't see how they can possibly be making any money at this time. They may be more concerned with building a loyal customer base, or to "build a better phone company" at a current loss but with profit later on.

Think about it:

SR basically charges $16.58 per month (using the $199/yr. plan) for unlimited local and national calling when common wisdom puts the break-even point for such unlimited plans at $20.

On top they give away a free 2-phone system (I've seen the phones for $90 plus tax at my local Office Depot store or as low as $63 at Amazon.com) They don't even ask for the phones back if someone leaves for another service, it just becomes a "free gift." I am sure many took advantage of that freebie, even if they had no intention to join a VOIP to begin with. They are paying their supplier probably about $30 themselves for each phone system with the potential to lose all of it to someone just wanting a quick way to get some nice phones.

Then they include E-911, which others charge for or don't offer at all. They've included this service for free since they started, and it does cost them extra to provide. As you can see in the news and other threads, the other VOIP's are scrambling to come up with the extra resources to provide E-911. Market leader Vonage's president doesn't think they can do it even before the 120-day deadline, but hopes that "if the FCC sees a genuine effort made" that it would be enough. Yet, Sunrocket includes it without much fanfare and the few pockets in their system that don't have it yet are promised to have it up and running within 30 days.

Then they give away an extra free $3 in international minutes (works out to be 100 free minutes to Germany and the UK at 3 cents per minute, other countries vary) Assuming they pay half the amount for these int'l calls to their providers, that is still $1.50 that comes off the $16.58 they generate off each user if the user takes advantage of these extra minutes.

They don't charge any shipping cost at all, no startup cost or setup fee. Never a cancellation fee. They don't tie customers into a long-term contract with obligatory cancellation penalties. There are tremendous costs involved shipping the rather large starter-kit, which they absorb instead of passing it onto the customer like most VOIPs.

They include Canada in their "Unlimited" calling plan, something not every VOIP provider can do, as it costs extra.

They give away, as part of their base plan, a second number for free (a so-called SIGNATURE NUMBER) which can be used for another family member or to split up business and personal calls. This second number comes with it's own voicemail box, distinctive ring and allows the same full setup that the PRIMARY NUMBER allows (distinctive ring, several call forwarding features, message notification, etc.) They also allow that second number to be an ANYWHERE number, a number setup in a different area code to make calls to your phone a local call for those living in that area code. Others either don't offer a secondary number at all or, if they do, they charge extra for it. The few services that actually offer a secondary number in their base plan for free only offer a distinctive ring, never with full voicemail setup and full customization.

I have yet to see a single board message about someone using their Sunrocket phone "too much," in other words, triggering a mechanism or being told that they have to curb their calling habits or have their service cancelled alltogether, as has happened with several other VOIP's. SR's Unlimited is truly Unlimited, not capped at 2000 or 3000 minutes, apparently.

They port existing phone lines over to their service at no additional cost. Most others either don't offer line porting or charge extra for it.

Their tech support is available until midnight, other VOIPs provide much less tech support (For example, Broadvox tech support shuts down at 7 every day)

Talking to Sunrocket tech support yesterday I was told to expect a lot of free upgrades over the summer. Full 100% fax support is promised (it currently works about 75% of the time,) activation of the second phone port on the gizmo, Microsoft Outlook integration/import in the Address book/Contacts area, etc. From the sound of it their engineers are addressing compatibility issues and are working on innovations for the current system.

How can Sunrocket afford to do all that and keep the cost below $17 per month?

Have they streamlined to the point where they can be profitable at under $13.00 income per user? Are they just ok with losing money for the first year or two to then emerge as one of the few remaining VOIP's with a huge customer base?

I hope they don't eventually become another Vonage or Packet 8, offering desired features a la carte at additional cost and start passing dubious "FCC Recovery Fees" or "Excise taxes" onto the consumer. Right now they act like the complete opposite of that, but who knows if they get bought out eventually and what happens then. I am glad I signed up for the $199/yr. plan, as that should give me price protection for at least the first full year, even if they have to ask for more money from their monthly customers after summer.

I can't see how they can make any money at all at this point, but considering that Vonage invests about $300.00 in each customer in advertising cost (TV ads, newspaper, internet banners, etc.) Sunrocket may be content to invest half of that in initial customer generating cost via word-of-mouth and freebies (with no advertising whatsoever) at an overall loss, hoping to build a base of customers that swells to the point of overall profitability.


rhymemaze

join:2005-03-10
Upper Marlboro, MD

Re: SUNROCKET can't be profitable at $16.58 per mo

Good post. This topic is brushed on a lot I've noticed. The other day, someone mentioned that SR is monitoring the posts on this forum. I would like to hear from someone at SR ( Oh I don't know, Joyce Dorris maybe, though not likely) and get a general rundown of their 1 year and 5 year plans, as well as finding out what makes the company tick.

I keep hearing that SR will fade away, not last, etc.
It's funny, because every time I navigate over here to broadbandreports.com, there is an increasing number of positive reviews on the home page. I personally think that they are going to blow up (customer base) over the next year based on the way they handle their business. Only time will tell if they last, but I think they are doing what consumers love to see, a "straight forward, no nonsense" approach.

I don't know the customer base numbers for vonage and SR, but, my feelings are that SR is creeping up as a legitimate competitor ( please feel free to school me on these numbers).

oh well, more power to SR. Thanks for doing what the others would not even consider.


rizzo2dial
Premium
join:2004-08-05
reply to georgepan

Re: SUNROCKET can't be profitable at $16.58 per month

said by georgepan:

They port existing phone lines over to their service at no additional cost. Most others either don't offer line porting or charge extra for it.
I agree w/ pretty much everything you wrote except for the above. Which VoIP is dumb enough to charge for LNP?!

There is one potential risk to all who've signed up for the $199 plan:

If SR decides to end that plan (for new subscribers), and a little over 2 months thereafter they go out of business (or bankrupt), if they can't afford to provide pro-rated refunds, all remaining pre-paid dollars are pretty much lost to the consumers.

Why? CC companies only allow you to dispute charges up to 60 days old. That's why I qualified the above w/ SR waiting a little over 2 months. The chargeback window for even the most recent $199 customer would be closed.

The above is unlikely; however, playing devil's advocate points out at least one potential way the consumer can get screwed on the $199 deal.

I tend to agree w/ the idea that the $199 plan is SR's way of promoting their service w/o spending additional advertising dollars. After all, one of the most effective ways to generate business is from WORD OF MOUTH, presumably by satisfied customers.

Perhaps SR will operate this way for 1-2 years, generate a huge & loyal customer base, wait for enough competitors to fold, and then raise rates to the point where they can make some money (but w/o gouging the consumer).

Perhaps SR's parent company is using SR as a means to write off SRs losses against other profitable segments.

Only time will tell what will become of SR (and all the other VoIPs).

Rizzo

mreg

join:1999-12-20
Brooklyn, NY

1 edit
reply to georgepan

Re: SUNROCKET can't be profitable at $16.58 per mo

Remember, however, that it's not quite $16.58 a month that's dribbling in. It's $199 up front. That's per customer who's paid annually. That's a lot of money. Used wisely, and assuming they're operating in good faith, there's lots of ways to make money with all that money. I wouldn't cry for them just yet...

georgepan

join:2005-05-09
Wesley Chapel, FL
reply to georgepan

Re: SUNROCKET can't be profitable at $16.58 per month

I don't think Sunrocket has a parent company. They have investors, though. I doubt they could go belly-up at this point, at least not this year. They are signing too many customers up at this point, most at the $199.00 deal, so for a while they are probably going to be quite flush with cash because they are getting all this upfront money.

Could it be that because of the complete lack of advertising, relying strictly on word-of-mouth and internet mindshare, that they can actually make a profit at that lower price point?

I would like to see some sort of profit/loss statement from them to gauge that.


RockyBB
Premium
join:2005-01-31
Steamboat Springs, CO
reply to mreg

Re: SUNROCKET can't be profitable at $16.58 per mo

The $199 is a no-interest loan... all the SR cheerleaders are arranging for working capital cheaper than any bank. It covers the wholesale cost of all the "freebies" and to establish the service. Assuming that they continue to grow the business, and folks continue to make the loans, then everything is covered. It's kind of like a Ponzi scheme, where the new money pays for the old business... (I'm not making any allegation of anything wrong or illegal or unethical... everything is disclosed.) Once the growth stops, and the cash stops rolling in, then SR collapses...

tj008

join:2004-06-24
Cincinnati, OH

1 edit
They are no more a scheme than Packet8 is. P8 takes investors money by selling stock. And weve all seen how valuable the stock is lately. (At least with SR, you get phone service with your money. )

SR management/directors have grown a different business model for their voip co. They tell you everything up front, no "gotchas", plus when you recieve the package there is more documentation inside than any other voip provider Ive used - including a Subscriber Agreement. If nothing else, they present an image both on website and packaging that they are in business and doing well.

The $199 yearly plan, if managed correctly, could earn them much more during the years time.

As with any provider, only time will tell. So far it looks like they are doing fine. They are hitting on all cylinders - ordering, fullfillment, packaging, customer service, website, tech support, marketing, etc. My hat off to 'em!



--
DSL. Voip providers: Lingo (UTStarcomm), SIPphone, FWD. Voip providers on trial: Nuvio, SunRocket. Tried: wIPphone=rates OK, Teleo=great, no ATA, Broadvoice=great until..., will give em another chance.


voiplover
Premium
join:2004-05-28
Portsmouth, NH
reply to georgepan

Re: SUNROCKET can't be profitable at $16.58 per month

I agree with a lot of this. Quite simply, they have deep enough pockets to buy over enough customers @ $199/year. It is a gamble and a race to build a voip company. If things work out their five year plan will work. It's comparable to the $99 alarm systems that raked in huge monitoring for companies like ADT. Generally they are looking for an 18 month return per subscriber, then it is all gravy.
If they can, I think that they we keep the $199 deal if it works.

artisticcheese

join:2004-11-09
Carrollton, TX
reply to georgepan
Is not Vonage spends $200 to a acquire a new customer? If they are profitable then so in Sunrocket since they don't spend $200 to acquire a new customer since they rely on word of mouth of promoting their services and according to this newsgroups it looks like working.
--
»www.windowsvsunix.com

georgepan

join:2005-05-09
Wesley Chapel, FL
reply to georgepan
Rocky-

Predictions of a collapse are a bit far-fetched without actual knowledge of true numbers. Service cost has been coming down tremendously, so they can probably make it happen at the price point they are currently offering. Of course initially they are "investing" in their customer base in lieu of advertising, but after the initial investment they should be able to run profits from thereon out. After reading some industry articles on how low cost per minute has dropped just in the last few months I believe that the $20 threshhold that is commonly seen as the break-even point for providing unlimited VOIP may be a bit high. In the long run they can probably make money at the $17.00 price point, as long as they don't continue to give away expensive goodies every year.

Besides, those running the company are former MCI executives who had been responsible for very successful and profitable innovative platforms. They are not likely to engage in a temporary Ponzi scheme.

cbrain

join:2000-05-21
Silver Spring, MD
Reviews:
·Comcast
·DIRECTV
·Future Nine Corp..
·DSL EXTREME
·Verizon FiOS
·Google Voice
said by georgepan:

Besides, those running the company are former MCI executives who had been responsible for very successful and profitable innovative platforms. They are not likely to engage in a temporary Ponzi scheme.
You are aware of the relationship of MCI to Worldcom and its history?

This is not necessarily a reflection on the people at SunRocket but ...

georgepan

join:2005-05-09
Wesley Chapel, FL
reply to georgepan
artisticcheese-

Actually, Vonage is not profitable right now. They are counting on their advertising to build a customer base large enough to eventually bring in profits.

georgepan

join:2005-05-09
Wesley Chapel, FL
reply to georgepan
cbrain-

The stated Sunrocket philosophy is very different from any POTS and VOIP, so it is safe to assume that the 3 individuals think the way you do about the Worldcom's of the world. But who knows for sure? The advantage of VOIP is that companies don't have to spend Billions of Dollars building infrastructure and backbones. They can piggyback onto existing technology and thus offer service for much less. I believe after first losing money on "generating" their customer base SR will run profit, even at their low rates.


VoIP Shopper

@ny325.east.verizon.n
reply to georgepan

Re: SUNROCKET can't be profitable at $16.58 per mo

Maybe SR is just getting ahead of other VoIP providers, who will slide down to SR's price as the competition continues to bubble up. Or perhaps that's all their service is worth at this point, and it's simply priced to the market.

In the end, success or failure will depend upon the quality and reliability of their service. Price is important but it isn't everything. Any advice for this VoIP shopper regarding their service -- based upon your actual experience? The question isn't whether you're getting your $16.58 worth: It's whether at $16.58 you're getting Vonage's $24.99 worth...


mack1951
Universal Soldier

join:2000-04-18
Bayonne, NJ
Reviews:
·Verizon FiOS
reply to georgepan
I agee with a lot that was said here, I think the one thing that is missing is that they are a privetly help company. Perhaps their plan is to build a large customer base, do an IPO and make a big winfall for the original investors. If that happens it will be interesting to see how they continue to operate when they have share holders looking for bigger profits to answer to.
--
THE ROAD: Romans 3:23, 6:23, 5:8, 10:9


RockyBB
Premium
join:2005-01-31
Steamboat Springs, CO
reply to georgepan
Hey georgepan, I wasn't predicting SR's collapse ... predicting only that IF the growth stops, THEN it would collapse.

It's obvious reading threads on this board that SR has a marketing plan that has appeal, that it has run its service in a way that inspires enthusiasm, and that they appear to be a responsible carrier that is succeeding at fulfilling its claims.

That said, you really really really have to admit that the CFO is calling the webmaster twice a day to learn what the signup counts are ... knowing that his CLEC bills are due, that his bandwidth bill is due, that his LD bills are due, his IT bills are due, his Uniden bill is due, his payroll is due ... The $199 is the fuel for the SR engine ... we read about P8's stock placement, and Vonage's private investments ... sure SR is private, and we can't know for sure, but my crystal ball says that SR's day to day working capital funding comes from its users instead of from professional investors that have evaluated the risk and can afford to lose it all...

I'll not yet withdraw my Ponzi analogy, but there are other less inflammatory analogies ... grocery CO-OPs and mutual insurance companies come to mind. Those companies return cash dividends to their "user/investors." SR seems to be providing its "dividends" in the form of discounted service rates relative to it competitors.

Nothing wrong with that...again everything is disclosed (we hope). Would make a good business school case ... "how to start a company by borrowing money at no interest from your customers for services that they could buy elsewhere without having to make the loan"... It sure makes sense that they're ex-MCI guys!


cbrain

join:2000-05-21
Silver Spring, MD
Reviews:
·Comcast
·DIRECTV
·Future Nine Corp..
·DSL EXTREME
·Verizon FiOS
·Google Voice
said by RockyBB:

...
I'll not yet withdraw my Ponzi analogy, but there are other less inflammatory analogies ... grocery CO-OPs and mutual insurance companies come to mind. ...
AOL

lstevens

join:2002-08-17
Brookline, MA

1 edit
reply to RockyBB
Sunrocket has substantial VC money from a very experienced VC Firm who validated their business plan in excruciating detail before investing...

georgepan

join:2005-05-09
Wesley Chapel, FL
reply to georgepan

Re: SUNROCKET can't be profitable at $16.58 per month

VOIPShopper-

I believe you actually get more features with Sunrocket vs. Vonage at about half the price.

Let's compare, in short form:

Both offer many features that are identical, so let's put those aside. Both have excellent call quality due to the codecs used. Both had very minor outage issues recently.

Differences:

Vonage:

- Vonage offers softphone at $4.99 add'l.
- Ability to have toll-free incoming at $4.99 add'l.
- Repeat Dialing
- In-network calls
- Call Transfer

SR:

- SR includes a signature number. Vonage has one available, but it is $5 more per month.
- Signature number includes voicemail and is fully customizable as for setup features (# of rings, forwarding, voicemail notification, etc.) Not with Vonage.
- Both have "Int'l call block", but SR has "Anonymous Call block" and "411 Call Block"
- Message screener software (allows call intercept while message is being left.)
- Advanced Voicemail Notification Features: Cell Phone, IM, e-mail, pager.
- E-911 is included. Vonage does not offer E-911, but will have to in the future.

Price advantages in addition to the much lower base price:

-SR has $3.00 call allowance for int'l calls (100 free minutes to Germany and UK, as an example)
- SR's international rates are lower than Vonage's
- SR gives away two 411 calls per month, then charges $0.75 for each thereafter. Vonage: $0.99 cents for each right away.

Since both services have similar call quality and reliability (SR's reliability rating is actually higher) Vonage shouldn't be exactly double the price for the same thing. For myself I HAVE to have the signature number for my wife. If I were to add that to a Vonage account not only do I pay $33.00 (exactly double what I pay SR) but I still don't get voicemail with Vonage's version of it, a deal-breaker, as my wife wants her own voicemail box.

Startup cost with SR is zero, with Vonage: $30 setup fee, $10 shipping cost, over $3 in taxes. Taxes come back every month, bringing the $24.95 plan to an actual "paid" $27.25 deal. With SR taxes are included in the total.

And, don't forget the nifty 2-phone cordless speakerphone system SR gives away.

lstevens

join:2002-08-17
Brookline, MA

1 edit

Re: SUNROCKET can't be profitable at $16.58 per mo

they got my business, and so far, three of my friends/family


RockyBB
Premium
join:2005-01-31
Steamboat Springs, CO
reply to lstevens
said by lstevens:

Sunrocket has substantial VC money from a very experienced VC Firm who validated their business plan in excruciating detail before investing...
that's good to know ... the bosses got their seed money from someone else ... first rule of a good businessman, put someone else's money at risk!

my statements were, of course, complete speculation (i.e. pulled out of my butt) based on some (not all possible) information and my own life experiences. and, of course, my guidance is provided free of charge with no guarantee of anything. you get what you pay for.

I find nothing nefarious in SR's marketing offer, and I don't think that they're swindlers or crooks. Perhaps you'll note a degree of envy in my comments!

Those that find SR's marketing offer to be compelling should enroll, recognizing that their $199 is at risk. Not my cup of tea, but different strokes for different folks. (BTW the free phones are not showing up on SR's website today, unless they're hidden or disclosed during the signup process.) Personally, if someone wanted to try SR, I'd advise the month to month plan only...if all is as everyone says, it's still worth $25/month... Avoid making no-interest loans...

artisticcheese

join:2004-11-09
Carrollton, TX
I think you still can get $20 a month deal with some coupon and if you want to get free phones you need to have a referal from existing customer or click on phone bird is standing on (intersting idea).
--
»www.windowsvsunix.com


GARainman

@dallas01.ga.comcast.

1 edit
reply to georgepan

Re: SUNROCKET can't be profitable at $16.58 per month

If you want the free phones, enter the promo code:
XXXXXXXXXXX on the main screen and it'll give you the free phones. You may have to call them afterwards to get them to send them to you...my Gizmo showed up without them.

Moderator note: Removed referral, posting of referrals are not permitted.

georgepan

join:2005-05-09
Wesley Chapel, FL
reply to georgepan
nice try, Gar, using your phone number as promo code. Maybe someone will bite.

rocky-

Yes, month to month is $19.95 with a code (let me know if you need the code and I'll dig it up for you) and you still get the 2 free phones.

lstevens

join:2002-08-17
Brookline, MA

Re: SUNROCKET can't be profitable at $16.58 per mo

actually, given the minimum value of the phones at $60, they would only have to stay in business 7 months for you to break even... almost guaranteed with VC backing...


GARainmain

@dallas01.ga.comcast.
reply to GARainman

Re: SUNROCKET can't be profitable at $16.58 per month

I'm kind of wondering what you mean by nice try? It's a perfectly VALID promo code. It works. Try it.

georgepan

join:2005-05-09
Wesley Chapel, FL
reply to georgepan
lstevens-

Actually, it takes less time. My last two Verizon bills were outrageous. $100 each month. Sunrocket had to stay in business for only 2 months (they did) and I broke even on my purchase, the following 10 months are pure gravy. Actually, since I was paid $25 for each of my first 8 referrals and $10 for each subsequent referral I have actually made money on this deal already and got my entire year's worth of phone service at no charge.

Come to think of it, I didn't even include the large referral cash awards ($25 for the first 8) in my list of things Sunrocket pays out initially to build their customer base, although that is obviously quite a substantial investment in new customers. For instance, in my case, I referred 14 clients to this service so far, so Sunrocket paid me $260.00. I already used $200 of it in Amazon.com cash, the other $60 are pending (not quite 31 days yet.) A huge investment to gain lots of customers.

med1234

join:2002-05-03
Westmont, IL
I think what may keep in business is the fact that after a year most of the current customers will sign-up for another year at 199.00 or so, plus many new one's. The rate of new customer sign-up's will drop but they will be sitting on a bunch of cash by then from the 199.00 advance from current custiomers for another year and new sign-up's. Year two almost all of first years customers re-sign + new customers = maybe what SR is betting on to stay in business.

hoffa3

join:2000-04-18
Las Vegas, NV
reply to RockyBB

Re: SUNROCKET can't be profitable at $16.58 per mo

Exactly.

DiskDrive
Goin' In Circles
Premium
join:2004-11-03
Farmington, MI
reply to georgepan

Re: SUNROCKET can't be profitable at $16.58 per month

said by georgepan:

Could it be that because of the complete lack of advertising, relying strictly on word-of-mouth and internet mindshare,
If memory serves me correctly, I received snail-mail spam from SunRocket a few weeks ago...