Hold the Phone . . . Is Vonage Saved?

This Friday 4/6/07 is the date a Federal Judge said he will issue an injunction which threatens to leave Vonage and its 2 million customers with dead air. But it looks like Vonage found a way to keep the lines of communication open. According to a filing with the Securities and Exchange Commission, the company has signed a deal with a wholesaler of voice over Internet Protocol services called Voiceone, provided by VoIP Inc.

This deal could provide Vonage with a work-around for at least two of the three patents owned by Verizon Communications.

Since the judge announced he would issue an injunction, Vonage and its subscribers have been living under a cloud of uncertainty. On the one hand, the judge could issue a stay on the injunction that would last a couple of weeks or until Vonage has had time to appeal the court’s decision. On the other hand, the judge could also require Vonage to stop service immediately to ensure it is not continuing to infringe on the Verizon patents. That would mean a catastrophe for Vonage and its customers, who would be without phone service. Vonage’s recent deal with VoIP Inc. could help convince the judge to give Vonage more time.

But according to an article in C-Net News, that isn’t the end to problems for Vonage. Clayton Moran, a stock analyst with the Stanford Group, is quoted as saying, “Vonage is in crisis mode, the uncertainty is impacting operations. We expect many existing customers to cancel service. And it will also make it more difficult for Vonage to attract new customers.”

The article points out further challenges in the form of competition from cable operators that are bundling voice services similar in price and function to those offered by Vonage, as well as offerings from Internet companies like Skype, Google and Yahoo. Plus, Vonage also faces another law suit by Sprint for patent infringement.

Clearly “saved” is too strong a word for the outcome of this new deal for Vonage. But at least it provides some degree of certainty to its customers that their phones will remain in operation.

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