What the Verizon Verdict Means for Vonage

Olga Kharif (3.9.07)
http://www.businessweek.com/technology/content/mar2007/tc20070309_887320.htm?chan=technology_technology+index+page_today%27s+top+stories
887320.htm?chan=technology_technology+index+page_today%27s+top+stories

More on Vonage patent lawsuit, the larger implications for Vonage.

After a weeklong hearing in the U.S. District Court for the Eastern District of Virginia, a jury ruled that Vonage Holdings must pay Verizon Communications $58 million in damages and a 5.5% licensing fee per subscriber per month. Vonage's costs per line would increase by about $1.6 per subscriber, or almost 20%.

The company's stock fell 3.86%, to $4.85, an all-time low, the day the verdict was announced.

With its financial position corroded, Vonage, long rumored to be shopping around for a buyer, could finally become cheap enough for an acquisition by a cable company, or even a telco like Verizon, whose VoiceWing Web-calling service has so far failed to take off. Indeed, Verizon's 19-page complaint notes: "Vonage's expanded marketing and advertising of its infringing services threaten to shift more customers and goodwill to its business at Verizon's expense"

This decision carries huge implications for the $4.4 billion U.S. VoIP-services industry as a whole. "The message this sends to the VoIP industry is, if you build a patent portfolio, it helps you negotiate in these situations," Rabena. The number of VoIP-related lawsuits mounted by telcos and other entrenched players could rise. According to the U.S. Patent & Trademark Office, there are 2,273 patents related to VoIP, many of them belonging to telecom old-timers like Verizon, AT&T, Motorola, Broadcom, and Cisco.

And that spells more trouble ahead for small Web-calling service providers looking to retain their foothold on the market. In his closing arguments on Mar. 7, Vonage's lawyer said, "this case is about choice." Thanks to the Verizon victory and other potential legal action in the future, the choices for Vonage will be far fewer.

Vonage to pay $58 million in Verizon patent case

Marguerite Reardon
http://news.com.com/Vonage+to+pay+58+million+in+Verizon+patent+case/2100-1036_3-6165747
.html?tag=html.alert


Internet phone provider Vonage has been ordered to pay $58 million to Verizon Communications for infringing on three of the company's patents.

Vonage, which provides a service that turns broadband connections into phone lines, was found by a Virginia jury to have infringed patents that cover the technology used to connect these VoIP calls to the regular phone network, as well as some features for implementing call-waiting and voice-mail services.

The monetary damages and the ongoing royalties awarded Verizon could have a significant impact on Vonage, if it doesn't come up with a solution that doesn't infringe the patents. The Internet phone service provider has yet to turn a profit.

But the biggest risk for Vonage is that the company could also be forced to shut down its service. In addition to the damages, Verizon is asking the court for an injunction. On March 23, U.S. Judge Claude Hilton will hear arguments to decide whether Vonage's service should stop offering service until an acceptable licensing agreement can be worked out. Vonage said in a press release that it doesn't expect any interruption in service.

"Even though the damages could have been worse, the royalty fees and ongoing legal battle, will add more expenses," Moran said. "And that could impact the future profitability of the company."

Don’t Don't Apply 1968 Telecom Rule to Wireless, Says AT&T

Drew Clark (2.26.07)
http://www.drewclark.com/2007/02/dont-go-back-to-1968-telecom-rules-says.shtml

AT&T and Verizon talk about national broadband and wireless regulation while speaking at the Technology Policy Summit.

This is the beginning of a potential push toward national broadband, which if instituted would force changes in legislation, and shift the focus of municipal wireless projects.

AT&T’s Senior Vice President Jim Ciconni has acknowledged a need for national broadband. “We don’t have a national broadband policy, we have never had a broadband policy, and, given the importance of competitiveness, we should have one,” said Ciconni.

However, Tom Tauke, Verizon Communications Executive Vice President countered by saying “a national broadband policy would do more harm than good." But he encouraged government-private sector collaboration to obtain more data about broadband deployment.

Tauke referred positively to KetuckyConnect, an effort to compile statistics about regional broadband deployment. The government could provide subsidies and loans for deploying broadband in rural areas that enjoy a lesser degree of broadband deployment, he said.

They also discussed wireless regulation, with Ciconni claiming that things have changed since the carterphone, saying “there are a plethora of carriers and a wide variety of devices that are available” on wireless networks, thus any rule that hearkens back to 1968 will be rejected.

Verizon expands 50-Meg footprint

Brain Santo (2.27.07)
http://www.cedmagazine.com/article/CA6419926.html

Verizon expands 50 Mbps in 6 of its 16 state FiOS coverage.

The six states where Verizon's 50 Mbps tier is now available are Connecticut, Florida, Massachusetts, New Jersey, New York, and Rhode Island. Other FiOS markets will get the tier this year.

The mid-tier maximum connection rates in those six markets was increased from 15 Mbps downstream and 2 Mbps upstream to 20 Mbps down and 5 Mbps up, while the top-tier service was increased from maximums of 30 Mbps down and 5 Mbps up to 50 Mbps down and 5 Mbps up.

Verizon said that more than 6 million homes and businesses in parts of 16 states are now passed by its fiber network, but it declined to say how many of those could subscribe to the 50 Mbps tier. The TV franchise agreements Verizon has struck in the Tampa area cover only a few thousand households.

Future of Net phone firm Vonage hangs in balance

Leslie Cauley (2.20.07)
http://www.usatoday.com/printedition/money/20070220/vonage.art.htm

Verizon is taking Vonage to court for patent infringement on 48 counts.

This could stifle growing VoIP companies and have an impact on service and innovation in the future.

Vonage claims Verizon's patents are too broad for any company to work around and still remain in business. 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."

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.

William Bosch, a Vonage lawyer offered a prediction: "We think there is an extremely good likelihood this jury is going to find that (the Verizon patents) are invalid, that they never should have been granted in the first place."

Jeffrey Citron, Vonage's chairman and chief strategist, has been subpoenaed to appear as a witness — for Verizon. That has put him, potentially, in the awkward position of testifying against his own company. Vonage is fighting the subpoena, Schulz said.

Qwest Treads Slowly in Fiber Rollout

Roger Cheng (2.8.07)
http://online.wsj.com/article/SB117090418422001834.html

Qwest is cautious to enter fiber market, allowing AT&T and Verizon to set the course. Many believe Qwest doesn't have the financial stability to make the upgrades necessary to be competitive against U-Verse and Fios.

Depending on development area, Qwest's slower adoption of fiber will effect choices of service providers for developers. This also shows the increased spending on fiber for faster and greater content to meet and exceed future demand.

AT&T and Verizon have poured billions of dollars into upgrading their systems to fiber. Verizon is spending $18 billion to connect many of its homes to the fiber-optic network. The company hopes to make FiOS TV service available to 18 million homes out of the 33 million homes in its landline operating area by the end of 2010.

AT&T is spending $4.6 billion to upgrade parts of its network with fiber-optic lines while using software to increase the speed of its network, enabling an Internet TV service called U-Verse. It hopes to make U-Verse available in at least 19 million homes by the end of next year.

Dan Yost, who runs product development and marketing for Qwest, said the company is working to replace copper lines with fiber ones in some markets, though he acknowledged the deployment was "not that extensive" in Qwest's 14-state operating territory.

Qwest has recently sold off assets giving them more financial flexibility to potentially put more dollars toward fiber investment; however for the time being they will still depend on DirecTV for television services and Sprint Nextel for wireless phone services. Most would agree that the push for more bandwidth will force Qwest to invest in upgrades regardless of their financial standing sooner than later.

Lightspeed's Slow Start

Business Week Online

http://www.businessweek.com/magazine/content/07_07/b4021067.htm?chan=technology_
technology+index+page_more+of+today%27s+top+stories

Despite AT&T proclaiming that it will pump $4.6 billion into building enough fiber-optic cable and supporting technology to reach 19 million homes by the end of 2008, many to believe that AT&T will have a hard time cornering the internet/TV market as soon as they claim.


Technology glitches hobbled the rollout of Lightspeed last year. And though the TV service is up and running in fewer than a dozen markets with prices that undercut cable bills, a growing chorus of rivals, analysts, and engineers are skeptical that the network will offer enough bandwidth a few years from now to handle phone service, high-speed Internet, and multiple streams of high-definition TV.

Other operators have taken advantage of this slow start. Verizon is placing the most ambitious and risky bet. It plans to spend $18 billion—three times as much as AT&T—to lay fiber to every one of the 18 million homes it hopes to cover by 2010. AT&T is laying fiber into neighborhoods but is using existing copper phone lines to carry video the last few thousand feet. As a result, it will cost Verizon $1,750 to connect each home, vs. $450 for AT&T. Despite the higher price tag, ubs Investment Research expects Verizon to produce a return on its investment by 2011. The reason? It believes the Verizon network's higher bandwidth will lure more phone, Internet, and video customers—at higher prices—and thus generate about four times as much revenue as Lightspeed. On Jan. 29, Verizon backed up the theory when it announced that it ended its first full year of operations with 207,000 TV customers, representing 9% of the 2.4 million homes capable of receiving its video service in 2006. Just a few months ago, the company was hoping to finish 2006 with 175,000 video customers.

Doubts about AT&T's video project are fueling speculation it will have to buy one of the two U.S. satellite operators, DirecTV Group Inc. (DTV ) or EchoStar Communications Corp.(DISH ), to accelerate delivery of TV service.

AT&T remain confident in their decision to bet on a system that's more technically complex than Verizon's, arguing it will result in a TV service superior to anything else on the market.

687,000 FiOS Customers

http://www.dslreports.com/shownews/81280

"Verizon's fourth quarter earnings are in, and we'll skip right to the part we're interested in: Verizon says that FiOS TV was available to 2.4 million households at the end of last year. According to Verizon, 89,000 customers signed up for FiOS TV in the fourth quarter, bringing their total TV customers to 207,000. There's 687,000 FiOS customers in total, with 165,000 added in the fourth quarter. "Verizon Telecom added 142,000 more net broadband and video customers during the fourth quarter 2006 than it lost in primary wireline voice access lines," states the company."