Thursday, October 9, 2008

More on Vonage Debt Buyback

Televolution founder and CEO David Beckemeyer sent me some comments on my post Is Third Time a Charm for Vonage Debt Buyback? . David points out that there have been contrarian opinions about Vonage right along, despite the general industry cheerleading:

"The funny (sad) thing is you could have said most of these same things (no business) back in 2003. Some of us did say it back then, but the capital markets were blinded at that time. What I said back then:
  • Minutes would be commoditized, cost approaches zero - at the time, Vonage was charging $40/mo and "experts" said it was cheap  
  •  Regulatory Issues would be a nightmare - check
  •  911 isn't going away (thus changing their cost advantage) - check
  •  ILECs will retaliate - turns out they haven't had to, Vonage isn't a big enough threat
I recognized right away (unlike Vonage investors) that Vonage had few, if any cost advantages over a regular telco. The only difference is they don't put the wires in the ground - but unlike Cable and ILEC, that's also a disadvantage because they don't own or control the pipe into the home. And Vonage also lacks the buying power of the telcos.

But the most important problem for Vonage has, and continues to be, and I think this is still the biggest elephant in the VoIP room: THE HOME PHONE IS NOT BROKEN. It is not high enough on the radar of problems to make switching to unreliable VoIP worth the trouble, for most people."

And while we're traveling down memory lane, in Nov. 2004 I also suggested that the emperor's financial pants didn't 'pencil out' in "Is Vonage Overvalued?" Turns out I was right. Maybe I can get a job running an investment bank.

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