Vonage: On the road to recovery?

Internet telephony company Vonage is getting back on track with improved quarterly earnings and a deal, announced Thursday, to resell broadband service from Covad, a DSL service provider.

The new service, called Vonage Broadband, will offer speeds of 3 megabits per second to 6 Mbps to residential and small-business customers. It will allow Vonage to bundle its Internet telephony services with broadband services. Until now, customers using Vonage would get their own broadband service from a cable company or phone company and then add the Vonage service on top.

The news of the deal comes as Vonage announces first-quarter 2008 earnings. The company, which has been struggling to reduce its losses, said it lost $9 million. This was a huge improvement from the year before, when the company lost $72 million during the same quarter.

Revenue for the quarter was $225 million, up about 15 percent from the previous year.

A year ago, Vonage looked to be dying a slow death. It was still battling Verizon Communications in a lengthy and expensive patent infringement lawsuit. And its losses were mounting as customers dumped its service. But now it looks like the company has begun turning things around.

Of course, it isn't out of the woods yet. With a greatly reduced marketing budget, it is still having trouble attracting new customers. And it continues to lose a lot of customers every month.

For the first quarter, it added a total of 30,000 new subscribers, down from 56,000 new subscribers in the previous quarter and 166,000 during the first quarter of 2007. And it's still losing customers. The monthly churn rate, or cancellation of its service, rose to 3.3 percent from 3 percent during the previous quarter.

That said, Vonage seems more focused on surviving. And with its legal troubles out of the way, the company looks like it's refocusing its strategy. CEO Jeffrey Citron said the company will likely increase marketing spending in the latter part of the year, which should spur more customer growth.

[zeroplane]

Good for them,
Sadly I had to drop Vonage because over the 1 year period I had the service the quality constantly dropped. Curiously enough I am on Comcast during that time and Comcast is aggressively advertising services that are a direct competitor to Vonage. Is it just a fluke that systematically the quality of my Vonage services got worse and worse while the Marketing machine of Comcast picked up speed.

The same can be said about the total bandwidth I use to have and what it is now. I started with average downloads around 3000-6000kB/sec now I am lucky to get 80-120kB/sec. If anyone knows of a class action lawsuit against Comcast sign me up!

I wonder, until I move to a new ISP I am stuck with Comcast's VOIP which by the way is almost 40 dollars more a month compared to Vonage. :(

[kannuc]

why use Vonage which charges about $25 per month when you can get exactly the same service for twenty dollars a year from MajicJack - having tried both, I can't see a difference and it works just fine with Comcast

[vertical2010]

I have had Vonage for two years and (now) am happy with it. I wasn't at first and previously left negative comments here. But during the past year, call quality has been great & I have only had a few outages, all due to Comcast (my TV & cable internet were all down). I love the options Vonage offers with regard to voicemail notification (e-mail, etc.) and the wide variety of online account management options. Comcast offers nothing like it, at double the price. Also, Comcast has lately been lying, trying to get me to switch - said Vonage doesn't have E911 service - completely false. Plus I was able to downgrade to the 500 min per month option ($14.99) since some of my frequently called numbers switched to Vonage and Vonage-to-Vonage calls are free. Plus all incoming calls are free. So i end up well below the 500 min per month cap. Anyway, I've become a Vonage fan, and I hope it stays around.