Cable Burns SunRocket; Will Vonage Get Singed?

The party is over for Internet phone company SunRocket, whose death has been rumoured for weeks. Like larger rival Vonage, SunRocket had a hard time competing with cable companies like Time Warner Cable and Cablevision, which push cheap digital phone service as part of “triple-play” packages with TV and high-speed Internet access. SunRocket tried to set itself apart with unique pricing models, like a $200-per-year, all-you-can-eat calling plan, but it never took off. While Vonage has attracted 2.4 million customers, SunRocket’s last press release claimed 200,000 subscribers.

What does this mean for Holmdel, N.J.-based Vonage?  It’s certainly not good news. On the positive side, SunRocket’s problems have more to do with business and marketing than the technical merits of VOIP. (Vonage has other problems — like a patent war with Verizon and rapidly disappearing cash).  In the short term, SunRocket’s failure just frees up 200,000 early adopters who could sign up for Vonage.

In the long term, however, SunRocket could just be the canary in the coalmine for independent VOIP players.  Comcast, the largest U.S. cable company, is poised to quickly outgrow everyone. Comcast finished its first quarter with 2.4 million Internet phone customers — 350% year-over-year growth — and reports second-quarter results next Thursday.  Vonage argues that it just needs “scale” to survive, but it already has plenty of scale.  What it really needs is a value proposition that can effectively compete with that of the cable companies. 

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