Verizon Boxing Vonage into a Corner

Friday's news about the Verizon injunction on Vonage is not good news unless you don't like competition. I was in transit most of Friday, and haven't been able to comment about it directly until now, and I'm sure you've already followed as much of the story as you care to.

That said, the media did find me Friday morning, and before leaving for the airport, I managed to do one print story for Business Week and a radio spot for CBS Radio about the news.

I don't have a clip of the CBS Radio segment, but it would have played nationally throughout the day. If you caught it, please let me know - I'd love to know how it turned out.

The Business Week story did run on Friday, so that will give you a sense of my initial reaction to the news.

Finally, the week before, I was interviewed about the Verizon/Vonage situation by IT Business Edge, and you can read it here from their website. Michael Lindenberger, one of their writers, referred to the interview in his blog post on Friday, so he's added an update to my perspective.

All of this coverage took place before news of the reprieve on this injunction later on Friday, so it looks like Vonage has a bit of breathing room. But not much.

Taking all this into account, though, it's still not clear to me just how restrictive this injunction is - or could be.

- Can Vonage pursue new customers in the business/SOHO market, where Verizon isn't really selling VoIP?

- Can Vonage pursue new customers outside of Verizon's geographic footprint?

- Can Vonage pursue new business outside the U.S.? Of course, I'm thinking in particular about Canada. What are the implications here?

I suspect that all of these are/could be off limits to Vonage, and that's a pretty tough spot to be in. Ultimately, if the courts rule in Verizon's favor - regardless of how real or frivolous these patent claims really are (and that looks to be very debatable) - Vonage will likely be the author of its own demise. In that event, you could conclude one of three things - i) they underestimated Verizon's claims, ii)they didn't see this coming at all, or iii) they were aware of its potential, but gambled Verizon would never make a case of it - or never thought they would be able to make a case of it. You could also argue they never would have expected Verizon to take such an anti-competitive stance and use this as a basis to put them out of business. But that sure looks like what's happening.

Maybe I'm the eternal optimist, and maybe I'm the only one holding out hope for Vonage, but they do have one thing going for them that could come into play if they can somehow devise a workaround and keep going independent of Verizon. Being a virtual operator, they can do business wherever they can get last mile access, and are not limited by the footprint of a wireline network.

As mobility continues its ascendancy, this factor becomes less important, but still, I think this can be a virtue for Vonage. I may be grasping at straws, and lacking a network is the true Achilles Heel of any virtual operator --- but if they can somehow extract themselves from this mess, they certainly have many options to do business and steer very clear of Verizon.

I realize network access is a different issue from this litigation, but ultimately, Verizon is trying to bury Vonage, and this is the only way they can really go after them. If Vonage can survive this, I'm sure they'll find ways to do business with anybody but Verizon. And if they can't, Verizon will only succeed in hurting the biggest VoIP pureplay. They don't have a monopoly on VoIP, and everyone else in the game will find ways to do business without them.

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