* What readers think of Vonage's business costs
We received several reader replies to our recent coverage of Vonage’s high customer acquisitions costs and the effect on its business model.
Tony wrote and advised us that our business model and analysis “regarding Vonage has a very debatable assumption . . . assuming that the cost to acquire customers will remain high for Vonage over time.” Tony maintains that while it may be expensive “upfront” for Vonage to build a brand, he concludes that “once momentum takes hold, it takes less money to generate each incremental amount of additional awareness” – and therefore Vonage’s costs will come down quickly. Tony also finds it ironic that some of the negative stories about Vonage will, in his opinion, help acquisition costs come down even more quickly because the public exposure is helping Vonage build brand awareness.
Rob writes us from a different perspective, having been a product manager at a traditional phone company with intimate knowledge of the carrier’s business model. He suggests that the VoIP model from the incumbent carrier’s perspective can be positive “just on the copper savings alone.” He concludes (as did we) that the cost for incumbent carriers to provide voice will fall substantially because of VoIP and believes that voice will become the “loss leader” as carriers move to an all IP network infrastructure.
Rob suggests that those who control the local loop – including both telephone and cable companies – will be more of a threat to the Vonage model than its customer acquisition costs. He adds that while Vonage may fill an interesting niche, the biggest challenge for VoIP deployment will be how to migrate customers who don’t want VoIP and who require network infrastructure transparency because they won’t accept the inevitable changes VoIP brings. Rob rightly points out that issues such as security and uninterrupted power for consumer phones remain largely unresolved challenges in the consumer market.
We’d like to observe that we too see issues with many dimensions of consumer VoIP but also believe that VoIP will succeed in the consumer market. We’ve been VoIP proponents in both consumer and business markets for some time and see no reason to change our stripes now.
Having staked our position, next week we’ll turn to a real live consumer VoIP customer experience – pointing out the good and the bad of mass-scale VoIP deployments in general and bring your own broadband (BYOB) VoIP in particular.
