Vonage Woes: 2007 was Tough Year for the VoIP Firm

Vonage is facing some customer complaints over a multi-day outage this past weekend. But that's the least of its worries. On Friday telecommunications equipment maker Nortel Networks filed a lawsuit against Vonage in a U.S. District Court in Delaware claiming that it violated nearly a dozen patents.

This past year has been a rough one for the voice over Internet protocol company. I have to say, the long-term outlook is getting bleaker for the firm as it faces a seemingly endless stream of lawsuits.

At this point Vonage's lawyers should be experts with patent infringement lawsuits after the dealings with patent lawsuits filed by AT&T, Sprint-Nextel and Verizon. Those patent fights alone cost the broadband telephone company a grand total of $239 million, according to reports.

It's been a sad tumble for Vonage after bursting onto the scene as one of the most promising VoIP firms out there. Oh, how quickly things have changed. 2007 has been particularly bad with the resignation of CEO Michael Snyder, plans to cut 1,800 jobs and non-stop barrage of lawsuits.

If anything is more telling of the life of Vonage, it's the stock prices. It opened up on the NYSE at $17 per share and will likely end the year less than $2 per share.

One of the shining moments for 2007 was when Vonage the development of two work-arounds for the three VoIP patents Verizon was suing over. This was until this past weekend when the multi-day outage hit a number of users and the Nortel lawsuit loomed over the collective head of Vonage. One Vonage user posted the outage was an "extreme situation" at the site Broadband Reports where many other Vonage customers swapped weekend outage stories.

The biggest problem facing Vonage is its inability to keep up with its competitors. Many broadband providers like Comcast, Time Warner, and Cox offer a digital telephone service and the convenience of bundling services such as Internet access, cable TV, and phone services. Other VoIP solutions like Skype eliminated the need for proprietary equipment, like Vonage requires.

I'm not a betting man, but if 2008 goes anything like 2007 did I'd be surprised if the company can make through 2009. My fingers are crossed Vonage can turn its bad run around. If for no other reason I would hate to see its brilliant TV commercials vanish.

PCWorld