Vonage Patent Case Could Hurt Phone Competition Posted by Bob at 04/13/07 12:53 PM

Like a lot of folks, I have been trying to figure out what the ultimate fallout will be from a recent jury verdict that Internet phone company Vonage violated patents held by telecom giant Verizon.

C/NET News is out with a well-reported piece today that goes through the various possibilities.The article does a great job of laying out all the details of the case, so we won't get into all that here.

While it remains unclear exactly how the situation will play out, Vonage says it might be forced out of business if it isn't able to get the verdict turned over on appeal.

By itself, that would be bad for all phone consumers, not just Vonage customers. Competition from new rivals such as Vonage and cable operators have forced traditional phone companies such as Verizon and AT&T to fight harder for customers, generally driving down prices and improving service.

Far more troubling, however, is the possibility that Verizon might try to use similar litigation to cripple or shut down other new competitors in the phone business.

Let's put this in terms of cold, hard cash. For years I had plain old phone service with Verizon, which cost me more than $60 a month. That didn't include long distance. I was also charged extra for features such as call waiting, etc.

A few months ago I switched over to Comcast for my phone service, taking advantage of a bundle deal for phone, Internet and cable television. My phone service now costs about $35 a month, including free long distance, call waiting and a bunch of other features.

Verizon offers similar savings to its customers through bundles of services, but it doesn't yet provide it's fiber optic television service in my neighborhood. When it does, I will consider going back to Verizon.

This is why the Vonage/Verizon patent case should be so worrisome to everyone who pays a phone bill. If Verizon and other traditional phone companies can get the courts to kill off their new competitors, they will have little incentive to offer cheaper rates and better service.

Competition has clearly benefited phone consumers. It will be unfortunate if Verizon is able to use lawsuits to kill off its rivals rather than competing with them.

comments (4)

1 Posted by Whit Haggerson at 04/13/07 05:12 PM

I have had vonage for 1 year as a backup and because their overseas rates are lower than Bell South/AT&T.
I also use Yahoo and Skype for calls when the other party has the service.

2 Posted by James DuBreck at 04/26/07 08:00 PM

"Triple Play" Services from the cable companies are a joke and an insult to any knowledgeable consumer!!
I did the research and found that the "Digital Phone" service was MORE expensive than the same "unlimited long distance" service offered by BellSouth. However, BellSouth service is over double the cost of VoIP "Digital Phone Service" offered by SunRocket. So, I went with SunRocket and have verified that ANY net total cost for phone service over $17 per month is excessive. If all the features are added to the cable company service, it is over 45 dollars per month. Again, with all the taxes and fees, SunRocket is about 17 dollars per month - and MORE features and services are provided.
So, avoid "deals" that cost more than standard offerings. Do your homework and find the best service for the best price!! PS. I invested in a 35 dollar UPS for my computer - and my digital phone coverter box is plugged into it. Hence, I have phone service for about 8 hours during a power failure!!
-Jim

3 Posted by Ronald Stull at 04/27/07 10:02 PM

I switched to Vonage about two years ago and have had very good service at a very reasonable price. I have absolutely NO DESIRE to go back to AT&T.

Vonage is even more reasonable than the broadband phone service my cable company has.

A few things I like about Vonage - if our power and/or cable goes out, calls will automatically go to our cell phone. If I am on a conference call, I can have all incoming house calls go to the cell, which my wife will have while I am on the conference call. Or I can have the calls go directly to voice mail without being beeped, and the people making the incoming call do not get a busy signal either.

Try that with the land phone companies.

Ron

4 Posted by Paul Mullen at 05/03/07 11:26 PM

In Texas I haven't noticed any great reduction in AT&T phone prices - my friend's basic phone service, without call waiting, voice mail or free long distance, still runs over $40/month. The only good thing is that you can get DSL broadband service for as little as $16/month, compared to over $40 for cable broadband.

Since I ordered cable broadband service through Earthlink (though it is installed, maintained and billed by Time Warner our lcoal cable company)I was able to get their phone service, with caller id, voice mail and free long distance for just $19.95/month. So I guess it is swings and roundabouts - I pay $40 for internet and $20 for phone and she pays $40 for phone and $20 for internet.

But that brings me to another issue - it used to be possible to get DSL service without having AT&T phone service. Presumably the DSL provider leased the bare copper circuit from AT&T (then SBC). Now you can't have DSL unless you have phone service through the same company (Earthlink DSL service, provided in this area by AT&T, is only available if you have AT&T phone service).

This is not a technical issue - in Britain the telecoms regulator Oftel forces British Telecom to lease "unbundled" phone circuits to whoever wants them, so you can get just DSL service. You can then add a VOIP phone. In fact some companies will give you free 2 M/Bit DSL service if you order a £10 (about US$20) phone service from them. So why are we paying $60 for the same thing?