Webware

SunRocket, a voice over IP provider, told employees on Monday that it's shutting down, according to several reports from former employees.

The company's Web site is still up, but its customer service line has this recording: "We are no longer taking customer service or sales calls. Goodbye." An internal memo from Sonya Jefferson, director of routing and carrier services for SunRocket was posted on the GigaOm blog earlier Monday.

"Unfortunately this email contains very bad news. We have just been informed that any and all last ditch efforts to keep operations running as well as a potential sale of the company have not gone through and that SunRocket will cease operations at COB today. As such, today is my last day and everyone else you may have worked with at SunRocket. Regarding outstanding and future invoices: Sherwood Partners out of Palo Alto will be handling the close down of all invoices, current and outstanding."

SunRocket, which claimed it had 200,000 customers as of April, was one of several companies to offer an inexpensive telephony service that competed against the traditional phone companies. SunRocket's demise is not surprising. Thanks to IP, voice has become just another software application with companies like AOL, Google, Yahoo, and EarthLink incorporating it into other Web services.

Analysts have been predicting that it would be difficult for companies, like SunRocket and the more popular Vonage, to base an entire business around a VoIP service. While VoIP makes it relatively cheap to serve customers, it's still expensive to acquire them. And that is just the problem that Vonage faces.

Vonage, the most well known VoIP company, last reported it had about 2.2 million subscribers. But the company has also been struggling. Earlier this year a jury in Virginia found the company had infringed on three Verizon patents. Vonage is currently appealing the decision, but the legal battle is taking a toll on the company. In court in April, it said that it has been losing about 50,000 customers a month.

The trouble that SunRocket and Vonage is having is a clear indication how hard it is for a start-up to compete head-to-head with the traditional phone companies. Some of the newer VoIP companies, like JaJah, have learned this lesson. And they're designing services that work alongside traditional phone services, instead of simply replacing them.