Vonage: Bad for Shareholders, Good for Consumers

I've been a Vonage subscriber for over four years, and have never had any problems with them. I do know, however, that the company is losing money hand over fist, and that its share price is regularly hitting new all-time lows. Today it's down about 5.5% to $2.61; it's worth remembering that Vonage went public only last year, at a price of $15 per share.

One of the reasons for Vonage's slump today is the mess that is the collapse of SunRocket. I've consoled myself in the past that Vonage wouldn't simply go out of business overnight: someone, somewhere, would put a positive value on its millions of subscribers, and would take over the company as a going concern. But that certainly didn't happen in the case of SunRocket. And the NYT quotes John Nakahata, former chief of staff for the Federal Communications Commission, as saying that I should be rather less passive:

“Ultimately, the consumer has to learn to factor in, how stable is this entity I’m entrusting with my phone service?”

Clearly, Vonage is not a particularly stable company. What with patent fights and stiff competition in a commoditized marketplace, it's hard to see how the company is going to stay afloat for long. And the last thing I want is to find myself in a SunRocket-style situation where I lose my phone service overnight and have to struggle to move my number elsewhere.

And even the prospect of a takeover is not particulary reassuring. If Vonage is bought by some big telco, then there's a good chance I'll end up on that big telco's VOIP service, complete with the relatively high international rates I've been successfully avoiding by using Vonage. On the other hand, there's no point in switching from Vonage to some other small VOIP company, because all of them are pretty much in the same boat.

For the time being, then, I'm sticking with Vonage, and a lot of the reason why is that none of the more financially secure players in the market seem to offer anything like as good rates internationally. US consumers need Vonage to continue to exist, just to provide some level of competition against the triple-play packages which are becoming increasingly popular and which bury highly profitable international rates in the small print. Vonage's business model might not be great for its shareholders, but it's certainly good news for consumers.