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April 13, 2007 4:00 AM PDT
Is cable in Verizon's crosshairs?
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It's clear that Verizon may soon file suits against other stand-alone VoIP service providers, such as 8x8 and SunRocket, as it defends its VoIP patents. But some experts say it might also take on Internet companies like Skype, EarthLink and Yahoo, which offer VoIP services, or cable companies, which also sell telephony services using VoIP technology.
"I believe that anyone offering a VoIP service could be a potential Verizon target," said Joel Rosenblatt, a Florida-based patent attorney who has reviewed the patents in question. "These patents appear to be so broad that an argument could be made against just about any service that allows people to make calls from the Internet to a regular phone network."
law professor, Columbia University
Verizon declined to comment on any future litigation.
It makes sense that Verizon would target cable companies, because they represent the largest threat to Verizon's business. The reason is simple: stand-alone VoIP services from companies like Vonage have had little impact on the total telephony market.
Vonage and others have signed up only about 5 percent of all U.S. households for their services as of the third quarter of 2006, according to Forrester Research. Meanwhile, cable operators such as Comcast, Time Warner and Cox Communications, which have been offering service for only about 18 months, have been adding subscribers at a much higher rate. In the third quarter of 2006, roughly 6 percent of American households said they were using a cable VoIP service, according to Forrester.
Cable companies are also considered much bigger threats because, like Verizon, they can offer entire packages of service to consumers that include TV, broadband, telephony and, very soon, wireless.
The cable telephony offering is also considered comparable to Verizon's traditional phone service in terms of quality, because cable operators are able to segment their voice traffic to carry it over dedicated Internet pipes, allowing them to guarantee quality of service. Companies such as Vonage do not own any piece of the broadband network, so their traffic must travel over the same pipes as other Internet traffic, like that generated by Web browsing or e-mail. When broadband pipes are congested, voice service can suffer.
"The cable industry runs their service differently than Vonage does," said Tim Wu, a law professor at Columbia University who closely follows legal issues involving the Internet. "But these patents appear to be very broad. The cable industry must certainly have their eye on this case."
Comcast, which is the largest cable operator in the U.S. and has more than 2 million voice customers, declined to comment for this story.
The legal battle
Last month, a jury in Virginia found that Vonage infringed on three of Verizon's patents and it ordered the company to pay $58 million in damages. Last week, the judge in the case ordered an injunction that would bar Vonage from signing up new customers, but the company was granted a temporary stay of the injunction by a federal appeals court.
Vonage, which plans to appeal the lower court's decision that it is infringing on the three patents, is hoping to get a permanent stay on the injunction that will last as long as the appeals process.
Vonage's legal team says it's confident it will win its case on appeal, but the process could take two years or more.
Meanwhile, Vonage's business is already suffering. For one, the recent legal troubles have not helped the company retain customers, who had already been fleeing before the court's decision. On Thursday, Vonage executives said they were changing course, cutting the company's hefty marketing budget and about 10 percent of its work force to reduce costs to help pay for the ongoing legal bills. The company also announced that CEO Michael Snyder has resigned, effective immediately.
See more CNET content tagged:
Vonage Holdings Corp., cable industry, VoIP service, patent, VoIP
25 comments
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I don't think they will stop with cable companies either. This is nothing but bad for VoIP and IP Telephony.
Think of this, Vonage does what most IP PBX do except on a larger scale (gateways / billing / Call Control, user management) I don't think its too much of a stretch for VZ to suggest that any VoIP communications that touch the PSTN is covered under their patent.
I am a satisfied Vonage customer in spite of their shaky business plan. But if Verizon can attack ANY VoIP patents then I can't change to Comcast cable "digital voice" or anyone else except Verizon! Monopolies like that is why I dumped my telephone company!
the article say, so do cable operators. What "monopoly" does
Verizon have? If people don't want POTS they can rely on cell
phones. If they don't like either of those they can use Voip.
The problem isn't some mythical monopoly, it is the ridiculous
patent laws. Government is the source of this problem.
And BTW, the cable companies have all the opertunity in the world to fire right back with lawsuits against Verizon's FIOS offerings. In many cases the break local, state, and FCC regulations when installing their 3 product offerings.
You see it's like this.
I want good value for my money. Verizon stopped offering that some time ago. I can't say when exactly Verizon stopped treating me like a paying customer and started treating me like they were milking a cow but it's just not a good feeling.
Oh enough paying customers leave and the companies you sued can buy your carcass and get on with life.
That's not to say I like what we're all seeing happen with the patent system, but I just don't think you'll see people leave.
Let's face it. Verizon has a darned good wireless network. In my case, they're the only company I've signed up with for a second 2-year term.
Hopefully, at some time in the future they'll provide decent competition against the cable companies for television, as well as high speed internet, be it FIOS or DSL based.
I don't much care for this litigation of theirs, but I don't think you're going to see people leave.
Charles R. Whealton
Charles Whealton @ pleasedontspam.com
Hardware can potentially use some sort of telephony software such as Microsoft's or any software company. It even goes beyond VOIP since the patents are so broad.
This is hardcore Internet and seems central to the recent open source patent disputes, for instance: like Software as a Service Innovations.
Modems, Microsoft, HD radio tuners all use waiting and switching processes like this at some level. This is a large software patent issue I think. This needs to be clarified in the higher courts I hope quickly.
Hopefully the price could drop to at least 1% though rather than 5%. But is this right? I hope there is some help for Vonage out there as they really don't deserve to suffer like this all alone.
Another fascinating case. I can't wait to see what the higher courts think on the 24th., when more information is gathered.
I am a satisfied Vonage customer in spite of their shaky business plan. But if Verizon can attack ANY VoIP patents then I can't change to Comcast cable "digital voice" or anyone else except Verizon! Monopolies like that is why I dumped my telephone company!
The bigger issue at hand here is that Judges in the legal system, and the legal system itself for that matter are so far behind the times and so high tech illiterate. Additionally the patent system suffers quite a bit from illiteracy when it comes to the ether world.
usually they are trying to figure out ways to decrease service and increase fees!
Those that can't sue.
I strongly suggest that CNET look carefully at this issue and the list. Some of the names listed do NOT do business in the way Vonage does. Ergo they do not infringe upon the kind of patent Verizon holds. Indeed some of the listed companies own MANY patents of their own.
Since some of these companies have listed stocks and some are relatively small, giving misleading suggestions can have dire ramifications.
1) VOIP removes the requirement to pay the government imposed taxes so consumers move to voip providers.
2) Traditional phone companies are slow to respond and compete.
3) A suit is filed which now threatens VOIP providers.
This story can't end well.
Verizon is only taking this action because they are bleeding customers. For years they operated under the "a little less than good enough" only providing improved services when the churn rate finally hit panic inducing numbers. Their arrogance and blatant hatred of their customers in obvious in every anti-consumer move they make and every customer bashing comment spewing forth from their CEO (who seems to have been muzzled only recently). Flipping off the customer is today's number one corporate sport and the only thing that gets their attention is a kick in the financial groin.