If there were odds in Vegas for Vonage’s long term survival, they wouldn’t be looking good right now. Just after losing a patent infringement case to Sprint to the tune of $67 million (plus a 5% royalty of future profits), Vonage also lost parts of their appeal on a similar Verizon patent dispute. The news pushed after hours trading on their stock to less than a dollar per share yesterday. It’s not looking good for Vonage shareholders. Like life in general, business is about perspective. The perspective of Vonage supporters is that of an upstart that was willing to take on an entrenched monopoly industry, only to be attacked (and maybe killed) by the status quo. Telecom status quo supporters say Vonage is a “parasite,” who rode their facilities unfairly, and apparently, illegally, and now deserve what’s coming to them. Time will tell whether Vonage will survive, but I’m sure there is feverish strategizing taking place on how to leverage a Vonage demise. Who stands to win?
Let’s assume for a second that Vonage does not make it. Unlike the SunRocket demise, there doesn’t appear to be another stand alone VoIP provider with enough credibility to absorb a flood of Vonage subscribers. The irony in this, is to some extent, Vonage played this role after the SunRocket episode. But now, Vonage subscribers really won’t have another VoIP only company to turn to. In a Vonage demise scenario, VoIP subsbcribers will probably be quite leery of signing up with yet another VoIP only provider anyway. That would suggest that either cablecos or telcos have the best chance at Vonage’s two million plus subscribers. An argument can be made that cable may have the lead, since many Vonage customers abandoned the local telephone company and may not feel comfortable returning. Cable would be wise to come up with a “welcome Vonage customer” campaign, seizing on the advantages of being an alternative to the local phone company. But before cable gets too excited, they should recognize that many Vonage customers never left the local phone company, and use Vonage as a second line (“teen” lines as an example). Telcos will therefore have a golden opportunity to “win” those customers back with their own second line VoIP option. AT&T’s VoIP product is branded CallVantage, while Verizon’s is branded VoiceWing. This Vonage scenario may be a boon for those less recognized VoIP brands. Of course, all of this may be moot, should a suitor just come in and buy Vonage’s subs outright. I haven’t, nor am I qualified to, done any valuation analysis, but Vonage as a company appears to be getting cheaper by the day. Pretty soon, those two million subs may be cheap enough to buy outright, robbing us of the spectator view for a feeding frenzy on “serviceless” Vonage subscribers.