CES - Vonage hopes new services will improve prospects

Vonage introduced a new router and new services at CES.

Troubled voice-over-IP service provider Vonage is rolling out new products and services at the Consumer Electronics Show in a bid to reverse its downward spiral.

Intellectual property lawsuits brought by Nortel, Verizon, Sprint and AT&T have distracted Vonage for the past year. During that time, customer acquisition slowed and defections grew to 3 percent in the third quarter last year.

But Vonage says it is ready to turn a corner. The suits were a weapon that the phone companies used to defend their businesses in the face of competition from Vonage, said Jeffrey Citron, chairman, chief strategist and interim CEO at Vonage. "It was a successful strategy. It distracted us and slowed us down," he said. "Instead of rolling out MyVonage six months ago, we were dealing with workarounds." MyVonage is the name of a new campaign at the company to introduce a host of services geared toward customer lifestyles.

While the lawsuits were ongoing, the company was developing workaround technology that would allow its business to move forward without infringing on the relevant patents. Vonage has now settled all four major lawsuits against it.

That has left Vonage free to spend more time focusing on its business, said Citron. It hired new engineers who designed a router, the first time Vonage will sell its own router rather than one from Cisco or Motorola.

The router has an unusual feature: a screen. It displays information about problems that the modem might have in plain language. For instance, rather than showing a flashing light like most routers, this one displays words telling users that the Ethernet cable is unplugged.

New customers will be able to buy the V-Portal router online starting Wednesday for US$9.99 after rebates.

In addition to the new router, Vonage is beginning to roll out many new features that it is showcasing at alpha.vonage.com. For instance, customers can now use voice-activated dialing, simply speaking a name to place a call. Customers can also send a voice message to anyone via e-mail. The message arrives as an attached audio file.

Call blast is a new feature that lets customers send out a voice mail simultaneously to a group of people. Citron anticipates that will be useful when he's in charge of calling 15 kids who go to school with his kids to tell them there is a snow day.

"We expect to roll out a new capability every month or two," Citron said.

Vonage also plans to offer another service that lets users access the voice recognition system from any phone to make a call through Vonage. The company is also testing software that would let customers make Vonage calls via software on their laptops.

Many of these services are free to Vonage customers.

Citron said that the future for Vonage will be brighter. Despite continued high churn, last quarter it had a gain of 77,000 customers, which he says isn't as good as it should be. The company has worked to cut costs, and improvements in customer service should help decrease customer losses, he said.

In the meantime, speculation continues to circle that the payouts Vonage made to settle the lawsuits will cripple it. But Citron was confident that the company's troubles are behind it.

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Nancy Gohring

IDG News Service

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