Following some rough times with legal battles and steep financial losses in 2007, Vonage may be seeing some light at the end of the tunnel. Last week, the company reported record revenue growth for Q1 2008, driven by an increase in subscriber lines and higher average revenue per user, and it narrowed its losses to $9 million for the quarter. Vonage also announced a partnership with Covad to offer a new Vonage Broadband service by year-end.

Through the relationship with Covad, Vonage will offer DSL services with maximum download speeds of 3M or 6Mbps to both residential and small business customers. The offer will improve Vonage's competitive position against the telcos and cable companies by integrating these services for customers who want to buy a voice/data double play bundle from a single vendor. 

In a prepared statement, Jeffrey Citron, Chairman, Chief Strategist, and Interim CEO said, "Consistent with our strategy of focusing on the customer, Vonage Broadband enables us to respond to the demand from customers who prefer the Vonage brand. In addition, it provides us with a competitive offering that continues to give customers the freedom of choice."

But Vonage isn’t entirely out of the woods yet. It added 30,000 net subscriber lines in the first quarter 2008 and finished the quarter with more than 2.6 million lines in service, which by comparison to AT&T, Verizon, and Qwest shows good progress, since the incumbent local phone companies all lost voice subscribers for he same period. However, compared to the cable company as an alternative voice provider, Vonage is losing ground. For example, Comcast added 639,000 new VoIP customers in Q1 2008, and it now has 5.1 million VoIP subscribers.

Double play bundles have been an effective competitive advantage for wireline providers, so we think Vonage Broadband is a good addition to the Vonage portfolio. But now we are left in a quandary. We used to categorize Vonage as a BYOB (Bring Your Own Broadband) VoIP service provider. But with a bundled broadband service option coming by year-end, we’ll have to come up with a new acronym to categorize the company. Buy Our Broadband Too (BOBT) added to BYOB VoIP (Vonage = VoIP + BYOB and / or BOBT) is way too many letters to be a catchy headline.

Steve Taylor is president of Distributed Networking Associates and publisher/editor-in-chief of Webtorials. Larry Hettick is a principal analyst at Current Analysis.