Vonage
Encyclopedia
Voice over IP
Voice over Internet Protocol is a family of technologies, methodologies, communication protocols, and transmission techniques for the delivery of voice communications and multimedia sessions over Internet Protocol networks, such as the Internet...
(VoIP) network
Computer network
A computer network, often simply referred to as a network, is a collection of hardware components and computers interconnected by communication channels that allow sharing of resources and information....
and SIP
Session Initiation Protocol
The Session Initiation Protocol is an IETF-defined signaling protocol widely used for controlling communication sessions such as voice and video calls over Internet Protocol . The protocol can be used for creating, modifying and terminating two-party or multiparty sessions...
company that provides telephone
Telephone
The telephone , colloquially referred to as a phone, is a telecommunications device that transmits and receives sounds, usually the human voice. Telephones are a point-to-point communication system whose most basic function is to allow two people separated by large distances to talk to each other...
service via a broadband
Broadband
The term broadband refers to a telecommunications signal or device of greater bandwidth, in some sense, than another standard or usual signal or device . Different criteria for "broad" have been applied in different contexts and at different times...
connection. The company's name is a play on their motto "Voice-Over-Net-AGE".
The company promotes itself as "Vonage the Broadband Phone Company" in the U.S. Founded in Edison
Edison, New Jersey
Edison Township is a township in Middlesex County, New Jersey. What is now Edison Township was originally incorporated as Raritan Township by an Act of the New Jersey Legislature on March 17, 1870, from portions of both Piscataway Township and Woodbridge Township...
, New Jersey
New Jersey
New Jersey is a state in the Northeastern and Middle Atlantic regions of the United States. , its population was 8,791,894. It is bordered on the north and east by the state of New York, on the southeast and south by the Atlantic Ocean, on the west by Pennsylvania and on the southwest by Delaware...
, Vonage is now located in Holmdel Township, New Jersey
Holmdel Township, New Jersey
Holmdel Township is a township in Monmouth County, New Jersey, United States. As of the 2010 United States Census, the township population was 16,773. Holmdel Township was formed by an Act of the New Jersey Legislature on February 23, 1857, from portions of Raritan Township .Holmdel is a suburb of...
. The company first offered subscription service throughout the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, then expanded into Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
in 2004 and the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
in 2005. As of March 2010, Vonage held nearly 2.4 million subscriber lines.
Initial public offering
In operation since 2001, Vonage went public on May 24, 2006 at a price of $17.00 per share, and dropped 23.5% to close at $13.00 the next day.In the period before the initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
(IPO), Vonage solicited its existing customer base via automated phone call announcements and e-mails with an offer to buy shares of the IPO (usually only large institutional investors such as banks are able to buy shares of an IPO). The price fell 12.7% in one day to close at $14.85 on the New York Stock Exchange, the worst trading day for any IPO in 2006 up to that point. The IPO raised $531 million for the company. Vonage's post-IPO handling of individual pre-IPO investors resulted in a class-action lawsuit. As of 2009, Vonage announced that an agreement in principle had been reached to settle with IPO investors. The firms underwriting the IPO, Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
, UBS, and Deutsche Bank
Deutsche Bank
Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...
, were fined and ordered to reimburse customers for "failure to adequately supervise communications" with investors. NYSE regulators went so far as to investigate possible short-selling.
The IPO and its aftermath earned Vonage a Business 2.0
Business 2.0
Business 2.0 was a monthly magazine publication founded by magazine entrepreneur Chris Anderson, Mark Gross, and journalist James Daly in order to chronicle the rise of the "New Economy"...
Magazine award as 14th of 101 Dumbest Moments in Business for 2006.
Restructuring efforts
In 2006, in preparation for Vonage's IPO, Michael Snyder, former president of ADT Security Services replaced Vonage co-founder Jeffrey A. CitronJeffrey A. Citron
Jeffrey A. Citron is the chairman of Vonage, a voice-over-IP phone company. He was previously affiliated with Datek Online, the fourth-largest online stock brokerage at the time of its merger with Ameritrade in September 2002....
as CEO. In 2007, in a restructuring effort to reduce ongoing net losses in the face of double-digit stock price slips and patent infringement issues, Snyder resigned, and Citron returned as Interim CEO. The company announced plans for 10% (180) layoffs, as it secured $215 million in financing.
In 2008, with Vonage stock at $1.42, Citron stepped aside as Marc Lefar, former CMO of Cingular Wireless, became CEO based on his performance in multiplying customer base and reducing churn rate
Churn rate
Churn rate , in its broadest sense, is a measure of the number of individuals or items moving into or out of a collective over a specific period of time...
. Citron continued as board Chairman.
On July 9, 2009, Vonage stock dipped to $0.31, but an August price surge associated with announcements for a dialing plan and a portable phone app
Application software
Application software, also known as an application or an "app", is computer software designed to help the user to perform specific tasks. Examples include enterprise software, accounting software, office suites, graphics software and media players. Many application programs deal principally with...
raised the stock to between $1 and $2 (April 2010.)
Patent infringement
On June 19, 2006, Verizon filed a lawsuit charging that Vonage infringed on five of Verizon's patentPatent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....
s related to its VoIP service. The patents describe technology for completing phone calls between VoIP users and people using phones on the traditional public switched network, authenticating VoIP callers, validating VoIP callers' accounts, fraud protection, providing enhanced features, using Wi-Fi handsets with VoIP services, and monitoring VoIP caller usage.
On March 8, 2007 a jury found Vonage guilty of infringing three patents held by Verizon, and not guilty of infringing two other patents. The jury ordered Vonage to pay US$58 million, and a royalty rate of 5.5% of every sale to a Vonage customer, back to Verizon. Subsequent to this jury award, there were a series of appeals and intermediate stays on payment. Vonage was punitively ordered by the court to stop signing up new customers; this was reversed on appeal three weeks later. On November 19, 2007 Vonage agreed to pay ~$120 million in damages to Verizon.
The Verizon patents brought to trial were the Voit patents: , , , , the Curry patent , and the Gardell patents: , . The successful prosecution of Voit patents against Vonage led to their reuse by Verizon in another suit against Cox Communications
Cox Communications
Cox Communications is a privately owned subsidiary of Cox Enterprises providing digital cable television, telecommunications and wireless services in the United States...
initiated in January 2008, as well as one against Charter Communications
Charter Communications
Charter Communications is an American company providing cable television, high-speed Internet, and telephone services to more than 4.7 million customers in 25 states. By revenues, it is the fourth-largest cable operator in the United States, behind Comcast, Time Warner Cable, and Cox Communications...
in February 2008.
The Verizon suit was the first but not the only patent lawsuit successfully prosecuted against Vonage. By December 26, 2007, Vonage was ordered to pay $80 million to Sprint Nextel
Sprint Nextel
Sprint Nextel Corporation is an American telecommunications company based in Overland Park, Kansas. The company owns and operates Sprint, the third largest wireless telecommunications network in the United States, with 53.4 million customers, behind Verizon Wireless and AT&T Mobility...
and $39 million to AT&T
AT&T
AT&T Inc. is an American multinational telecommunications corporation headquartered in Whitacre Tower, Dallas, Texas, United States. It is the largest provider of mobile telephony and fixed telephony in the United States, and is also a provider of broadband and subscription television services...
. Another lawsuit with Nortel
Nortel
Nortel Networks Corporation, formerly known as Northern Telecom Limited and sometimes known simply as Nortel, was a multinational telecommunications equipment manufacturer headquartered in Mississauga, Ontario, Canada...
resulted in no monetary damages.
Early: 1999-2000
Vonage had its genesis in a company called Min-X.com ("The Minute Exchange"). Jeff PulverJeff Pulver
Jeffrey L. Pulver is an American Internet entrepreneur known for his work as founder and chief executive of pulver.com. He has written extensively on the need to develop an alternative to government regulation of the applications layer of Voice over Internet Protocol telephony.-Biography:Jeff...
, noted VoIP proponent and owner of the successful VON conferences, incubated Min-X.com at his offices in Melville, NY
Melville, New York
Melville is a hamlet and census-designated place in the town of Huntington in Suffolk County on Long Island, New York, in the United States. As of the 2000 census, 14,533 people resided there.-Location:...
on Long Island between December 1999 and December 2000. Based on his experience at the bond trading giant, Cantor Fitzgerald, Pulver knew that any commoditized product is easily traded in a market. The year was 1999 and Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
was at the zenith of its global trading business (Enron at this point even had a bandwidth trading exchange). There were a significant number of regional IP telephony companies spread across the globe with large amounts of gateway capacity that could be efficiently brokered for profit. Unlike Enron's bandwidth trading market, Pulver's market would be a market where IP Telephony minutes and capacity could be traded in both a spot and futures contracts. By summer of 2000, Min-X.com had about six employees who were either technologists or former bond or stock traders. There was a business plan and initial "trading platform" prototypes built on Cisco
Cisco Systems
Cisco Systems, Inc. is an American multinational corporation headquartered in San Jose, California, United States, that designs and sells consumer electronics, networking, voice, and communications technology and services. Cisco has more than 70,000 employees and annual revenue of US$...
, Clarent and VocalTec
VocalTec
VocalTec Communications Inc. , is an Israeli telecom equipment provider. The company was founded in 1989 by Alon Cohen and Lior Haramaty, who invented and patented the first Voice over IP audio transceiver...
IP Telephony equipment.
Jeffrey Citron, former CEO and majority shareholder at Datek Online and also with net worth of $750 million, was the first major investor in Min-X/Vonage. He had been barred from stock trading by the SEC for life, but was still seeking angel investor opportunities.
Daniel Berninger, noted VoIP pundit and analyst with Tier 1 Research, was working for Pulver in 2000, and was helping Pulver bootstrap various new businesses including Min-X, Arieta and Free World Dialup. Dan's wife, an executive recruiter with a deep book, knew of Citron's availability and placed the call to him. Citron's first meeting with Pulver on the topic of Min-X happened in August 2000. Citron was chauffeured to the meeting in Melville in his own helicopter. Pulver gave the pitch, while Citron, seeking new investment wins, was intrigued by the idea of starting a new and (more importantly) unregulated marketplace. Citron immediately brought in his trusted banker, Carlos Bhola. Bhola was one of Frank Quattrone's disciples from the Internet banking group at CSFB
Credit Suisse First Boston
Credit Suisse First Boston was the former name of the banking firm Credit Suisse.-History:In 1978, Credit Suisse and First Boston Corporation formed a London-based 50-50 investment banking joint venture called the Financière Crédit Suisse-First Boston...
and by 2000, Bhola had formed his own boutique investment and advisory group. By October 2000, a deal was struck and Citron and Bhola made an initial investment of $1 million, in addition to 9 other $1 million dollar investments in several other early stage firms.
Bhola and his team quickly got to work building a better business plan and revenue model for Min-X to raise more money. Bhola's first conclusion was that an independent IP telephony minute trading marketplace was not going to stand on its own. Wholesale minute prices are priced in pennies. Brokerage commissions, as a percentage of the minute price would generate commissions in the fraction of a cent. Assuming that every regional IP telephony company joined the Min-X trading marketplace, the combined total of all the commissions generated on all the traded minutes from all the companies would not generate an attractive investment return. This calculation was true, even as growth in IP telephony was factored in. What was needed in this minute marketplace to spark exponential growth was a massive consumer of capacity who would perpetually buy minutes. "Min-X Enterprise Services," a company focused on selling IP voice services was born. Bhola and team, reran the numbers on the two new businesses. By November 2000, it became obvious that the really profitable business was "Min-X Enterprise Services" and not the Min-X marketplace. Citron and Bhola then invested an additional $10 million, Citron took the title of CEO, Bhola took the title of President, and the efforts of all employees were refocused on building "Min-X Enterprise Services."
In a December 2000 meeting, Citron and Bhola unveiled a new name for the new entity; "Vonage". The name borrows Pulver's "VON" acronym for "Voice on the Net" and the temporal meaning of the word "age", combining to form "Vonage", which would herald the start of a new era for consumer communications services (the age of VON). In January 2001, after moving to 10000 square feet (929 m²) of refurbished office space in the former Revlon building in Edison, NJ, Vonage was incorporated and commenced its ambitious plan.
Several important technical strides had been achieved by this time, notably the avoidance of intra-LATA
Local access and transport area
Local access and transport area is a term used in U.S. telecommunications regulation. It represents a geographical area of the United States under the terms of the that precipitated the breakup of the original AT&T into the "Baby Bells" or created since that time for wireline...
fees. LATAs are telecom regions that were created by the FCC upon the 1984 breakup of AT&T, and are subdivisions of states (or in some cases entire states) that carriers use to route calls. While long distance fees were rapidly falling across the continental US at the time, fees within states were still artificially high. Citron himself found it frustrating that the high fees for a call to his own sister in in another part of New Jersey were unavoidable. With VOIP, Vonage was able to sidestep those fees. For the New Jersey to New Jersey example above, Vonage would actually route the call to servers located in California, essentially bouncing the call across the country and back to create call nexus in another state, thereby avoiding the intra-LATA fees. Because each call traveled for most of its journey over the public internet, Vonage accrued no extra costs for the extra miles traveled. Additionally, Vonage's infrastructure improved with the acquisition of key employees Yuk Ming Lam (of Lucent) and Louis Holder (of Cantor Fitzgerald) in their technical engineering group, with call quality evolving to more resemble landline POTS calls.
The initial results from minute arbitrage were not sufficient to grow the company to the next level, and a private label strategy was conceived by the management team. They elected to offer their network to cable companies and MSOs, and provide VOIP infrastratucture and transmission for a portion of cable revenues. Michael Porta was brought in from New York University Medical Center to run Human Resources. Philip Giordano, a long time cable industry insider, was hired from Newhouse Media, a cable television and media company. Liberato DiCicco was hired from Ameritrade (formerly Datek) to run security and local operations. Michael Centrella (former CEO of Merlot Networks) was hired to run Sales. Mona Shah (Datek) ran company operations, including the network and NOC. Kenneth Laputka was hired to run Marketing.
Private label results were low based on sales, but influential in accelerating MSOs entry into VOIP and "triple play" offers, where the local utility offers cable TV, internet access, and phone service. It was alleged that Jeff Citron himself hand-delivered a proposal for private label VOIP services for Cablevision Systems to the Dolan family, owners of Cablevision, on the runway for their private jet in 2002. (Cablevision launched Optimum Voice one year later.)
In 2002 the management team elected to enter the direct to residential and business phone service markets under Vonage Direct. Carlos Bhola went on record saying that he would "wear a dress if 10,000 customers ever bought Vonage Direct." Brooke Schulz joined the firm to run Public Relations. John Rego joined the firm as CFO (from Windstar).
Products
In 2009, Vonage introduced the Vonage World calling plan, with "unlimited international calling to more than 60 countries" for a flat monthly rate.Vonage began offering smartphone applications in October 2009. The Vonage Mobile app provided international calling via Wi-Fi
Wi-Fi
Wi-Fi or Wifi, is a mechanism for wirelessly connecting electronic devices. A device enabled with Wi-Fi, such as a personal computer, video game console, smartphone, or digital audio player, can connect to the Internet via a wireless network access point. An access point has a range of about 20...
and cellular networks, promoted as offering "50% savings" over competitive rates. The free app works on devices running Android, BlackBerry
BlackBerry
BlackBerry is a line of mobile email and smartphone devices developed and designed by Canadian company Research In Motion since 1999.BlackBerry devices are smartphones, designed to function as personal digital assistants, portable media players, internet browsers, gaming devices, and much more...
, and iOS (iPad
IPad
The iPad is a line of tablet computers designed, developed and marketed by Apple Inc., primarily as a platform for audio-visual media including books, periodicals, movies, music, games, and web content. The iPad was introduced on January 27, 2010 by Apple's then-CEO Steve Jobs. Its size and...
, iPhone
IPhone
The iPhone is a line of Internet and multimedia-enabled smartphones marketed by Apple Inc. The first iPhone was unveiled by Steve Jobs, then CEO of Apple, on January 9, 2007, and released on June 29, 2007...
, iPod Touch
IPod Touch
The iPod Touch is a portable media player, personal digital assistant, handheld game console, and Wi-Fi mobile device designed and marketed by Apple Inc. The iPod Touch adds the multi-touch graphical user interface to the iPod line...
).
A month later, the Vonage World Mobile plan was introduced, with Vonage World unlimited calling features for a fixed monthly charge, and included a discount to home service users.
Introduced in August 2010, the free Vonage Mobile application for Facebook provides "free one-touch mobile-to-mobile calls to Facebook friends who also have the application" for iPhone/iPad, iPod touch and Android devices, operating over Wi-Fi (free) and 3G/4G networks (uses data minutes).
Requirements
In order to use the home service, customers employ a "Vonage" branded "VoIP router" or a phone adapter that connects to their main router or broadband modemModem
A modem is a device that modulates an analog carrier signal to encode digital information, and also demodulates such a carrier signal to decode the transmitted information. The goal is to produce a signal that can be transmitted easily and decoded to reproduce the original digital data...
. In addition, an upload speed of 90–240 kbit/s
Bit rate
In telecommunications and computing, bit rate is the number of bits that are conveyed or processed per unit of time....
as well as a reliable quality of service
Quality of service
The quality of service refers to several related aspects of telephony and computer networks that allow the transport of traffic with special requirements...
(QoS) optimized connection is needed to make calls without substantial lag
Lag
Lag is a common word meaning to fail to keep up or to fall behind. In real-time applications, the term is used when the application fails to respond in a timely fashion to inputs...
or jitter.
Telephone number availability
Subscribers are able to choose a number in the country of the service they subscribe to for their primary line, in an area code unrelated to their actual residence. Subscribers can obtain additional "virtual numbers" for a monthly fee. Vonage also offers virtual numbers in MexicoMexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
, Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
and Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
. While the company supports porting a U.S. telephone number via the FCC's local number portability
Local number portability
Local number portability for fixed lines, and full mobile number portability for mobile phone lines, refers to the ability to transfer either an existing fixed-line or mobile telephone number assigned by a local exchange carrier and reassign it to another carrier...
(LNP), not every phone number is available in every area code.
Residents of the U.S., Canada, and the UK may subscribe to Vonage by credit card from their respective country, but "phone routers" can be connected to the Internet anywhere. The company also offers a "V-Phone" USB phone adapter which, using a softphone application on an internet-connected computer, forms a portable telephone with access to the worldwide telephone network.
Emergency calls
A problem with any VoIP provider is that, since the physical location of a caller may not correspond to his or her listed phone number, traditional emergency telephone numberEmergency telephone number
Many countries' public telephone networks have a single emergency telephone number, sometimes known as the universal emergency telephone number or occasionally the emergency services number, that allows a caller to contact local emergency services for assistance. The emergency telephone number may...
service (9-1-1
9-1-1
9-1-1 is the emergency telephone number for the North American Numbering Plan .It is one of eight N11 codes.The use of this number is for emergency circumstances only, and to use it for any other purpose can be a crime.-History:In the earliest days of telephone technology, prior to the...
in North America) is not available. Many VoIP providers use e911 instead, and are required by the FCC to provide some form of emergency service. Vonage emergency phone service requires subscribers to register their address with the company and does not operate in case of an Internet connection disruption or power failure, unless an uninterruptible power supply
Uninterruptible power supply
An uninterruptible power supply, also uninterruptible power source, UPS or battery/flywheel backup, is an electrical apparatus that provides emergency power to a load when the input power source, typically mains power, fails...
(UPS) is used to power the Vonage telephone adapter, telephone base unit, and modem. Customers are responsible to maintain their 911 location information at all times.
If a customer dials 911 before the 911 verification is completed, the call will usually be routed to a national 911 call center where basic information must be given (name, location, nature of emergency, etc.), after which the call is transferred to a local public service answering point, like a local Police Department.
Service cancellation
To cancel service, Vonage requires customers to call a toll-free number, as service cancellation is not available on-line. Customer complaints about difficulties with the cancellation process and long hold times were detailed in a May 2006 Wall Street Journal article.Upon cancellation, customers frequently wish to transfer their phone number to another phone or VoIP service. Vonage offered local number portability (LNP) for exiting customers, but not without some difficulties, since early FCC LNP rules did not apply to VoIP services such as Vonage. In late 2007, the FCC tightened up those rules. Vonage LNP transfers are handled by an outside party (Focal Communications, acquired by Broadwing, acquired by Level 3
Level 3 Communications
Level 3 Communications is a telecommunications and Internet service provider headquartered in Broomfield, Colorado.It operates a Tier 1 network. The company provides core transport, IP, voice, video and content delivery for most of the medium to large Internet carriers in North America and Europe...
).
Quality of service and equipment compatibility
VoIP service relies upon consistent broadband-ISP uptime and VoIP-equipment compatibility with the ISP's modem. Though VoIP is optimized for voice, some faxFax
Fax , sometimes called telecopying, is the telephonic transmission of scanned printed material , normally to a telephone number connected to a printer or other output device...
equipment can be operated over VoIP, but compatibility of monitored alarm systems and other devices is less certain. Vonage offers "specially commissioned" Fax Line service which initially was alleged to have VoIP-type problems (prompting a 2006 lawsuit, settled 2008). The company has officially advised users of monitored alarm systems to contact their provider to determine VoIP compatibility, and has suggested using a wirelessly monitored system as an alternative.