Wednesday, February 21, 2007

Vonage and Verizon

I hope this is just one of the regular spats that companies have about patents:

Verizon and Vonage on Wednesday will present opening statements in a patent-infringement case that could have a big impact on consumers and the nascent Internet telephone industry.

Most immediately at risk is the future of Vonage (VG).

Vonage, one of the best-known brands in the Internet phone world, acknowledged last week that it doesn't have a plan for getting around use of technology that Verizon (VZ) claims violates patents it owns.

The upshot: If Verizon prevails in court, Vonage could be forced to shut down, at least temporarily, while it redesigns its service. That could cause a lot of heartburn for Vonage's 2 million customers.

Brooke Schulz, a Vonage spokeswoman, said Monday that Verizon's claims are baseless. "This is about Verizon trying to stifle competition," she said. "We have not infringed on their patents, period."

As for the prospect of Vonage shutting down, Schulz says, customers shouldn't worry. "We're working on a redesign plan."

Internet telephony, also known as VoIP, for Voice over Internet Protocol, is a Web-based phone service that closely mimics traditional phone service but sends calls over the Internet. VoIP costs only about $20 a month — though it requires an existing high-speed Internet connection — compared with $40 to $60 a month for regular phone service.

By the end of 2006, there were 8.6 million VoIP users in the USA, estimates JupiterResearch. By 2010, the number is expected to reach 22.5 million. Many of those customers are coming from traditional local phone providers such as Verizon and AT&T.

Verizon sued Vonage in June, claiming broad patent violation. An amended complaint in January alleged that Vonage "has appropriated the results of years of research conducted by Verizon and its predecessors.

If verizon actually has a case then there's an awful lot of us who are going to get screwed: including me.


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