Everyone who has hardcore interest in Voice Over Internet Protocol, VoIP, has probably heard about the now infamous challenge of Verizon on Vonage’s technology. Many VoIP forums are hot with up-to-the-minute news on the case with both the pro Vonage and anti Vonage crowd contributing. I feel there is a lot more riding on this case than just a matter of Vonage’s technology selection. Vonage doesn’t really use their own technology in many cases and rely on others for their interconnection to the traditional telephone service network, known as PTSN. In fact, a company called Level 3 Communications provides the interconnection to many of the VoIP providers.
While I may not be fully versed in the technical issues from the case I feel like the issue at hand is quite evident, Verizon wishes to corner the market. Don’t forget that Vonage is a combination of two old players in the telephone markets: Bell Atlantic, a baby Bell left over from the AT&T breakup, and GTE, a major provider that held monopoly markets where AT&T didn’t reside. Both of these companies enjoyed a monopoly status even after deregulation. They originally had to carry their own competition over their networks, retaining a cut of the income rather than losing the whole customer.
VoIP changed that world for the traditional telephone companies. It gave customers an option that may or may not ride on the existing telephone infrastructure depending on the routing of the call. Some VoIP customers may choose to use DSL has a interface to the Internet, carrier of VoIP. But many customers have turned to other types of Internet connections. The most challenging to the phone companies is the broadband connection provided by cable companies.
A friend of mine in North Carolina told me years ago that he believed cable companies held the key to the future. I didn’t understand at the time. Now I do. Most of the cable companies entered the Internet revolution by installing equipment to carry high speed Internet networking connections into the home. At first this increased communication capability gave the companies ability to better control their cable television controls. Next they found additional income in providing a high speed Internet connection to their customers. Now they were competing and if you notice their customer service got better. The final step came with the advance in VoIP technology and the cable companies began to provide their own digital telephone service.
But the cable companies didn’t get a free ride. A deregulated Internet meant customers used the data in ways they wanted. With that capability came the independent VoIP providers who simply provided the hardware. The actual data signal carried across the very data connection being provided by DSL and broadband cable. The technology now had the bandwidth to provide a quality voice connection. Another option is fiber or FIOS, which is growing but lacks infrastructure to have significant impact at this time.
One of the more aggressive of these companies was a VoIP upstart known as Vonage. Vonage doesn’t carry all the fancy features, but they provide one of the more reliable systems. They are also more economical, introducing their costs at fifteen dollars per month less than the cable companies. Vonage also found a niche in creative advertising, a trait that has greater affect on customer loyalty than most would think. Other companies compete in this arena such as Packet 8, SunRocket, and ViaTalk. But Vonage grew rapidly and soon felt they could convert to a public company. That decision ended up placing several bumps in the road that are being felt throughout the industry.
VoIP is still a young technology, even today. The technology is not really regulated by most state utility commissions and wasn’t even taxed until recently. As the technology evolves and grows the government has now found their way to cut into the profits and taxes, fees, and levies now apply. But what about the traditional phone companies? As people become comfortable with the new technology and equipment they are leaving traditional companies in large quantities. The traditional phone company has finally lost control and is subject to opinion about customer service as much as the cable companies.
I believe history will show that Verizon’s former Bell Atlantic was watching this technology early and probably wisely tried to corner the market. They believed by patenting technology that was common and easily becoming adapted for commercial use they could protect themselves. Now that the prediction has become reality it has become time to act. Verizon had to find a test case to see if their poison pill would give them the advantage they lost through legal monopolies.
Vonage, by being one of the biggest VoIP independent companies, provides an easy target. The IPO stumble only helped Verizon’s strategy by attacking the company while it is weak. If they win this battle then going after the other independent VoIPs will be an easy step. I am not clear how they will approach their cable brethren, but don’t discount their plans. Vonage is the test case to provide legal precedence and is only the start.
Now you see why I think the Vonage is not what the root cause of Verizon’s actions. It is only a stepping stone. I believe Verizon is seeing how far their gamble on patenting a small but quickly expanding technology will pay off. Do they really have grounds for the patent? I am not a patent expert, but I find it hard to patent such versatile and open technology. Otherwise Excel would never exist as Lotus would still provide the only spreadsheet and potentially be independent company. Microsoft didn’t introduce word processors, spreadsheets, or drawing software until other companies had long introduced such programs.
Verizon proclaims their technology and claims to be protecting their engineers. I feel the truth lies more in protecting their business. A business they could have easily saved by preparing for what they correctly predicted in a different manner. Using their vast government subsidies collected over the years they could have highly invested in VoiceWing and easily squashed the competition. Instead they intend to use our public court system and roll the dice. Let’s hope the courts rule in favor of the technology and, thus, in favor of the people.
While I may not be fully versed in the technical issues from the case I feel like the issue at hand is quite evident, Verizon wishes to corner the market. Don’t forget that Vonage is a combination of two old players in the telephone markets: Bell Atlantic, a baby Bell left over from the AT&T breakup, and GTE, a major provider that held monopoly markets where AT&T didn’t reside. Both of these companies enjoyed a monopoly status even after deregulation. They originally had to carry their own competition over their networks, retaining a cut of the income rather than losing the whole customer.
VoIP changed that world for the traditional telephone companies. It gave customers an option that may or may not ride on the existing telephone infrastructure depending on the routing of the call. Some VoIP customers may choose to use DSL has a interface to the Internet, carrier of VoIP. But many customers have turned to other types of Internet connections. The most challenging to the phone companies is the broadband connection provided by cable companies.
A friend of mine in North Carolina told me years ago that he believed cable companies held the key to the future. I didn’t understand at the time. Now I do. Most of the cable companies entered the Internet revolution by installing equipment to carry high speed Internet networking connections into the home. At first this increased communication capability gave the companies ability to better control their cable television controls. Next they found additional income in providing a high speed Internet connection to their customers. Now they were competing and if you notice their customer service got better. The final step came with the advance in VoIP technology and the cable companies began to provide their own digital telephone service.
But the cable companies didn’t get a free ride. A deregulated Internet meant customers used the data in ways they wanted. With that capability came the independent VoIP providers who simply provided the hardware. The actual data signal carried across the very data connection being provided by DSL and broadband cable. The technology now had the bandwidth to provide a quality voice connection. Another option is fiber or FIOS, which is growing but lacks infrastructure to have significant impact at this time.
One of the more aggressive of these companies was a VoIP upstart known as Vonage. Vonage doesn’t carry all the fancy features, but they provide one of the more reliable systems. They are also more economical, introducing their costs at fifteen dollars per month less than the cable companies. Vonage also found a niche in creative advertising, a trait that has greater affect on customer loyalty than most would think. Other companies compete in this arena such as Packet 8, SunRocket, and ViaTalk. But Vonage grew rapidly and soon felt they could convert to a public company. That decision ended up placing several bumps in the road that are being felt throughout the industry.
VoIP is still a young technology, even today. The technology is not really regulated by most state utility commissions and wasn’t even taxed until recently. As the technology evolves and grows the government has now found their way to cut into the profits and taxes, fees, and levies now apply. But what about the traditional phone companies? As people become comfortable with the new technology and equipment they are leaving traditional companies in large quantities. The traditional phone company has finally lost control and is subject to opinion about customer service as much as the cable companies.
I believe history will show that Verizon’s former Bell Atlantic was watching this technology early and probably wisely tried to corner the market. They believed by patenting technology that was common and easily becoming adapted for commercial use they could protect themselves. Now that the prediction has become reality it has become time to act. Verizon had to find a test case to see if their poison pill would give them the advantage they lost through legal monopolies.
Vonage, by being one of the biggest VoIP independent companies, provides an easy target. The IPO stumble only helped Verizon’s strategy by attacking the company while it is weak. If they win this battle then going after the other independent VoIPs will be an easy step. I am not clear how they will approach their cable brethren, but don’t discount their plans. Vonage is the test case to provide legal precedence and is only the start.
Now you see why I think the Vonage is not what the root cause of Verizon’s actions. It is only a stepping stone. I believe Verizon is seeing how far their gamble on patenting a small but quickly expanding technology will pay off. Do they really have grounds for the patent? I am not a patent expert, but I find it hard to patent such versatile and open technology. Otherwise Excel would never exist as Lotus would still provide the only spreadsheet and potentially be independent company. Microsoft didn’t introduce word processors, spreadsheets, or drawing software until other companies had long introduced such programs.
Verizon proclaims their technology and claims to be protecting their engineers. I feel the truth lies more in protecting their business. A business they could have easily saved by preparing for what they correctly predicted in a different manner. Using their vast government subsidies collected over the years they could have highly invested in VoiceWing and easily squashed the competition. Instead they intend to use our public court system and roll the dice. Let’s hope the courts rule in favor of the technology and, thus, in favor of the people.
