VoIP Trust Issues?

Seeing SunRocket fade away makes many small businesses nervous. Is voice over the network some scam that's unraveling? Will their new system be stranded like the 200,000 SunRocket customers? No, and no. The new voice technology offers huge savings and great features and will not go away. Second, your business VoIP system connects directly to your service provider or the Internet, depending, and not to a consumer service company like SunRocket. Business Internet telephony customers are in no danger. Other residential VoIP companies are now chasing SunRocket customers, so they'll be OK in a week or so as well. SunRocket's struggles come from being an Internet telephony-only company without a network of its own. The big name in that market, Vonage, spent millions of advertising dollars to establish their name as synonymous with VoIP and rise above the noise from their early competitors. Vonage also lacks their own network, meaning they could suffer

SunRocket's fate if the legal requirements forcing broadband providers to carry their service weaken. Tim Greene's story listed SunRocket as number four in the market, which surprises me. I thought Packet8 had more customers, but I haven't seen market numbers in a while. But notice the three companies leading SunRocket: Vonage, Verizon, and AT&T. Vonage earned their market share the hard way through expensive advertising, while SunRocket rode their coattails and offered a slightly lower price than Vonage. Verizon and AT&T, however, don't offer competitive rates at all, because both are $10-$20 more than Vonage and SunRocket per month. What the two cable companies have, however, is the network and the ability to bundle services for an apparent discount. When you own the cable network, when your phone division pays for access, the money shuffles around inside your own office. The phone division has no real cost, although the larger company certainly paid plenty to build out their cable plant. Even better, when you offer cable TV, Internet access, and phone service, you can price them all fairly high and offer discounts to get the prices back in line with competition. This advantage powers the marketing for Verizon and AT&T, since they can charge $40 or more for phone service, then drop the price to within a few dollars of Vonage and offer the convenience of a single bill each month. Read the cable trade magazines, and you'll see bundling marketing tricks in every issue.


Copyright © 2007 IDG Communications, Inc.

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