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Vonage Logo until 2006


Vonage ( ) ( ) is a publicly-held commercial voice over IP (VoIP) network and SIP company that provides telephone service via a broadband connection (the company's name is a play on their motto "Voice-Over-Net-AGE").

Vonage promotes itself as "Vonage the Broadband Phone Company" in the U.S. and as "Leading the Internet Phone Revolution." Up until August 2007, Vonage held the most subscribers at nearly 2.6 million subscriber lines, Comcast has now surpassed them and has the most VOIP subscribers. Vonage has completed well over 5 billion calls. Vonage has led the Voice over Broadband (VoBB), or Broadband Phone industry through its aggressive consumer marketing in the United States, Canada, UK and other countries globally.

Vonage was originally based in Edisonmarker, New Jerseymarker but is now located in Holmdel, New Jerseymarker. Vonage offers services to subscribers throughout the United Statesmarker. The company expanded into Canadamarker in April 2004 and into the United Kingdommarker in January 2005.

On April 12, 2007, Vonage CEO Michael Snyder agreed to step down as Chief Executive Officer and resign from the company's Board of Directors. In his place, Chairman and Chief Strategist Jeffrey A. Citron will serve as Interim CEO The company also announced plans for 10% (180) layoffs.

On July 29, 2008, Vonage Interim CEO Jeffrey Citron stepped down to assume the role of non-executive Chairman of the Board and serve as a consultant on long-term strategy. In his place, Marc Lefar (former CMO of Cingular Wireless) assumed the role of CEO. Marc Lefar previously had worked as the CMO at Cingular wireless (now AT&T mobility) for 4 years and had tripled their customer base while reducing churn rate by 50%.

Initial public offering

Vonage went public on May 24, 2006 at a price of $17 per share, and dropped 23.5% to $13 the following day. The closing price on December 15, 2008 was $1.00.

Prior to the IPO, Vonage solicited its customers via automated phone call announcements and e-mails with an offer to buy shares of the IPO. The price fell $2.15, or 12.7%, to close at $14.85 on the New York Stock Exchange, the worst trading day for any IPO in 2006 up to that point. The IPO raised $531 million for the company. Vonage's post-IPO handling of individual pre-IPO investors resulted in a class-action lawsuit(pending March 2007), earning the Vonage IPO a Business 2.0 Magazine award as 14th of 101 Dumbest Moments in Business for 2006.

Telephone number availability

Subscribers are permitted to choose any number in the country of the service they subscribe to for their primary line. Whether it be Vonage US, Canada or UK, subscribers may choose from any area code regardless of their actual residence. Subscribers also have the option of obtaining additional "virtual numbers" for a monthly fee. For example, a subscriber in Floridamarker may choose a number with Manhattanmarker area code 646, allowing callers from New Yorkmarker to be billed only for a local call. In addition, Vonage also offers 'virtual numbers' in Mexicomarker, Canadamarker and throughout Europe for any and all customers to choose from. This is especially beneficial to businesses with an international client base. While Vonage supports porting a telephone number in the US via the FCC's Local Number Portability , Vonage does not offer phone numbers in every area code in the United States.

Although only residents of the US, Canada, and the UK may subscribe to Vonage (paying with a credit card from their respective nation), the routers with phone ports can be plugged into the internet anywhere in the world. For instance, a student studying abroad in Brazilmarker plugs the router and phone into a cable or DSL internet service in the apartment or into an internet café that accepts notebook computers (LAN plug-ins), and the service works with the original local phone number and pricing. The student thus receives calls from and makes calls to the home country for no extra fee. International pricing is often so low that it can be cheaper than calling direct in the same country. For example, the Vonage price to Rio de Janeiro is USD$0.06/min (2005), but calling from a cell phone or pay phone in Brazil costs about USD$0.20/min. Vonage also offers a USB phone adapter (called a "V-phone ") that runs a softphone application on the computer, and with internet access, gives it a fully functional and portable telephone with access to the worldwide telephone network.

Service requirements

In order to use the service, customers must purchase or use a "Vonage" branded "VoIP router" or a phone adapter that connects to their main router or broadband modem. In addition, an upload speed of 90–200 kbit/s as well as a reliable/QoS optimized connection is necessary to make calls without substantial lag or jitter.

Emergency call issue

A problem with any VoIP provider is that, since the physical location of a caller may not correspond to his or her listed phone number, traditional emergency telephone number service, such as 9-1-1 and e911 in North America, are not available. Vonage emergency phone service requires subscribers to register their address with the company and is not operative in case of an Internet connection disruption or power failure (unless a UPS is used to power the Vonage telephone adapter, telephone base unit, and modem). Customers are responsible for maintaining their 911 location information at all times.

In the event that a customer dials 911 prior to the 911 verification becoming complete, the call will usually be routed to a national 911 call center where a customer must supply basic information (name, location, nature of the emergency, etc.), after which the call will be transferred to a local public service answering point, like a local Police Department.

Vonage charges customers $1.49, known as the "Emergency 911 Service Fee" to cover the cost of the 911 forwarding service. The Emergency 911 Service Fee went into effect on July 15, 2009; previously, Vonage had charged a $0.99 fee known as the "Emergency 911 Cost Recovery." Vonage claims the change "allows Vonage to maintain our commitment to safety, innovation and customer service."

Verizon & other lawsuits

On June 19, 2006, Verizon filed a lawsuit charging that Vonage infringed on five of Verizon's patents related to its VoIP service. The patents describe technology for completing phone calls between VoIP users and people using phones on the traditional public switched network, authenticating VoIP callers, validating VoIP callers' accounts, fraud protection, providing enhanced features, using Wi-Fi handsets with VoIP services, and monitoring VoIP caller usage.

On March 8, 2007 a jury found Vonage guilty of infringing three patents held by Verizon, and not guilty of infringing two other patents. The jury ordered Vonage to pay US$58 million, and a royalty rate of 5.5% of every sale to a Vonage customer, back to Verizon. Subsequent to this jury award, there were a series of appeals and intermediate stays on payment. These appeals ended on November 19, 2007 with Vonage agreeing to pay ~$120 Million in damages to Verizon.

The Verizon patents brought to trial were the Voit patents: , , , , the Curry patent , and the Gardell patents: , . The successful prosecution of Voit patents against Vonage led to their reuse by Verizon in another suit against Cox Communications initiated in January 2008, as well as one against Charter Communications in Feb 2008.

The Verizon suit was the first but not the only patent lawsuit successfully prosecuted against Vonage. By December 26, 2007, Vonage had also lost $80 Million to Sprint Nextel and $39 Million to AT&T. Another lawsuit with Nortel resulted in no monetary damages.

Service cancellation

Vonage requires customers to cancel service by calling a toll-free number, as service cancellation is not available on-line. Customer descriptions of the cancellation process frequently involve hold times of approximately twenty-five minutes, depending on call volume. Difficulties faced by customers when attempting to cancel Vonage were detailed in a May 2006 Wall Street Journal article which related one customer's experience with a Vonage representative who refused to cancel an account unless a repair attempt was allowed by the customer. In the last 12 month reporting period, the Better Business Bureau has closed 3687 complaints (as of October 2007). The balance of complaints centered on service, billing and refund issues.

Despite marketing their service as having no contracts or long-term commitments, Vonage charges customers a fee for cancellation within the two years of service, changed from one year February 1, 2007. This fee is noted in the provider's Terms of Service when a customer signs up or attempts to access his Web Account. The fee is $39.99 per physical voice line which is disconnected. This fee does not apply to dedicated fax lines, virtual telephone numbers, or the computer-based "SoftPhone" lines. A "Rebate Recovery" fee is also assessed if the account is canceled after the 30-day, money-back guarantee, but before 180 days of service. The "instant rebate" is different for each device and is offered during initial sign-up. If service is cancelled for any reason within 1 year, then the amount that was given as an instant rebate is subject to being repaid. There is also a cancellation fee ($39.99) that may apply. This fee is charged to customers who cancel within 1 or 2 years of their initial subscription. Customers who sign up after May 2009 are subject to the fee if they cancel within a 1 year timeframe.

The customer may have some or all of these fees and taxes refunded if he cancels service before the end of the money-back-guarantee period, which sometimes varies between 30 days to 60 days, depending on the sign up terms and frequency of communication with Vonage Customer Service. Often, representatives attempt to retain a customer by extending the money-back-guarantee period. Upon cancellation of the account, the customer is responsible for the cost of return shipping to Vonage.

As of March 2007, the FCC maintains that Local Number Portability rules do not apply to VoIP service providers such as Vonage; however, Vonage states that subscriber numbers may be transferred to other companies per its Terms of Service (section 6.6). Vonage states that LNP transfers are handled by Focal Communications, but Focal was acquired by Broadwing Corporation which itself was acquired by Level 3 Communications.

Service Issues

VOIP service is dependent on consistent broadband-ISP uptime and VOIP-equipment compatibility with the ISP's modem.

There have been widespread reports of difficulty in operating Fax machines on Vonage lines, either dedicated Fax lines, or regular Vonage lines. Difficulties have also been reported with residential alarm systems and TiVo.

Vonage suggests that customers contact their local home alarm system operator to determine whether their existing home alarm solution is compatible with any VoIP provider. Vonage does not make specific recommendations about security systems. However, Vonage does specifically mention alarm.com as being compatible because it uses wireless technology rather than depending on a phone line.

Vonage's early history as Min-X.com

Vonage had its genesis in a company called Min-X.com ("The Minute Exchange"). Jeff Pulver, noted VoIP proponent and owner of the successful VON conferences, incubated Min-X.com at his offices in Melville, NYmarker on Long Island between December 1999 and December 2000. Based on his experience at the bond trading giant, Cantor Fitzgerald, Pulver knew that any commoditized product is easily traded in a market. The year was 1999 and Enron was at the zenith of its global trading business (Enron at this point even had a bandwidth trading exchange). There were a significant number of regional IP telephony companies spread across the globe with large amounts of gateway capacity that could be efficiently brokered for profit. Unlike Enron's bandwidth trading market, Pulver's market would be a market where IP Telephony minutes and capacity could be traded in both a spot and futures contracts. By summer of 2000, Min-X.com had about six employees who were either technologists or former bond or stock traders. There was a business plan and initial "trading platform" prototypes built on Cisco, Clarent and VocalTec IP Telephony equipment. Unfortunately, Min-X did not have full-time management leadership and despite the many pitches to VCs, the initial funding necessary to bootstrap the firm was just not there. It wasn't clear that Min-X would get farther than just an idea.

Jeffrey Citron (the other Jeff) was coming off a year-long vacation having been bought out of his position as CEO and majority shareholder at Datek Online and also with net worth of $750 million. He had been barred from stock trading by the SEC for life.

Daniel Berninger, noted VoIP pundit and analyst with Tier 1 Research, was working for Pulver in 2000, and was helping Pulver bootstrap various new businesses including Min-X, Arieta and Free World Dialup. Dan's wife, an executive recruiter with a deep book, knew of Citron's availability and placed the call to Jeffrey. Citron's first meeting with Pulver on the topic of Min-X happened in August 2000. Citron was chauffeured to the meeting in Melville in his own helicopter. Pulver gave the pitch, while Citron, confident and sure of himself, was intrigued by the idea of starting a new and (more importantly) unregulated marketplace. By October 2000, a deal was struck and Citron invested roughly $10 million of the $12 million seed and took the title CEO of MinX.com. The convergence of so many important factors created an excitement throughout the nascent company.

Citron immediately brought in his trusted banker, Carlos Bhola and offered him the position of President. Bhola was one of Frank Quatrone's disciples from the internet banking group at CSFB and by 2000 Bhola had formed his own boutique investment banking advisory group. Bhola and his team joined the company and quickly got to work building a better business plan and revenue model for Min-X to raise more money.

Bhola's first conclusion was that an independent IP telephony minute trading marketplace was not going to stand on its own. Wholesale minute prices are priced in pennies. Brokerage commissions, as a percentage of the minute price would generate commissions in the fraction of a cent. Assuming that every regional IP telephony company joined the Min-X trading marketplace, the combined total of all the commissions generated on all the traded minutes from all the companies would not generate an attractive investment return. This calculation was true, even as growth in IP telephony was factored in. What was needed in this minute marketplace to spark exponential growth was a massive consumer of capacity who would perpetually buy minutes. "Min-X Enterprise Services," a company focused on selling IP voice services was born. Bhola and team, reran the numbers on the 2 new businesses. By November 2000, it became obvious that the really profitable business was "Min-X Enterprise Services" and not the Min-X marketplace. Efforts of all employees were refocused on building "Min-X Enterprise Services." In a December 2000 meeting in Pulver's green conference room, Citron unveiled a more attractive name for the new entity; "Vonage." The name borrows Pulver's "VON" acronym for "Voice on the Net" and combines it with the temporal meaning of the word "age," heralding the start of new era for consumer phone service.

In January 2001, after moving to of refurbished office space in the former Revlon building in Edison, NJ, Vonage was incorporated and commenced its ambitious plan.

See also



References

  1. USPTO Latest Status Info
  2. Vonage FAQs
  3. Vonage slips to Comcast in VoIP subscribers USA Today, Aug 9 2007
  4. Vonage Announces Plans To Move Headquarters To Holmdel Vonage Press Release publ. Holmdel Journal. Joan Colella, May 12 2005. Also archive.
  5. Vonage CEO resigns, Company Moves to Cut Costs. computerworld.com, April 12, 2007.
  6. Vonage Prepares To Cut Workforce 10% Information Week. W. David Gardner. 2007-4-12.
  7. http://biz.yahoo.com/prnews/080729/nytu142.html
  8. Investor Relations Stock QuoteVonage.com
  9. Initial Public Offerings Investorguide.com Usually only large institutional investors such as banks are able to purchase shares of an IPO.
  10. Investors sue Vonage over IPO CNET.com Marguerite Reardon, June 4, 2006.
  11. 101 Dumbest Moments in Business #14. Vonage CNN.com. Adam Horowitz, David Jacobson, Tom McNichol, and Owen Thomas, March 7, 2007.
  12. Vonage 9-1-1 dialing
  13. Vonage e911 - differences from traditional e911 Vonage.com help file on e911 service
  14. Vonage owes $120m after court failure, vnunet.com, November 19, 2007
  15. Eric Voit, Bethesda MD
  16. James Curry, Herndon VA
  17. Steve Gardell, Andover MA
  18. Verizon Sues Cox for IP Patent Infringement, Phone+, January 18, 2008
  19. http://www.multichannel.com/article/CA6530843.html?desc=topstory Verizon Sues Charter Over Voice Patents
  20. Vonage, Sprint settle patent dustup for $80 million, ars technica, October 08, 2007
  21. Vonage, AT&T Agree On Patent Lawsuit Settlement, ChannelWeb, December 26, 2007
  22. Vonage, Nortel settle patent dispute, ZDnet, December 31, 2007
  23. Vonage Faces User Complaints As IPO Looms Wall Street Journal, Shawn Young and Li Yuan, May 18 2006.
  24. Current BBB report US National BBB.org.
  25. http://www.vonage.com/features_terms_service.php?lid=footer_terms&refer_id=WEBTS0706010001W1#FEES
  26. Vonage terms of service, Vonage.com, retrieved March 14, 2008
  27. Corvis Corporation Completes Focal Acquisition Broadwing Press Release, September 2, 2004
  28. Level3 Completes Acquisition of Broadwing Level3 press release Jan 3, 2007.
  29. Home Wiring - Can I have both a monitored alarm system and Vonage?,Vonage.com FAQ, retrieved March 14, 2008
  30. Home Wiring - What is Alarm.com?,Vonage.com FAQ, retrieved March 14, 2008


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