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.

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.

Cox renewal bid comes up short, council say

By Rob O'Dell (1.10.07)
http://www.azstarnet.com/metro/163983

The City Council unanimously declared a proposal from Cox Communications for its cable franchise renewal insufficient in six key areas on Tuesday.

It set a deadline of Jan. 17 — the same deadline Cox has set — to come to an agreement in informal negotiations. If the deadline is missed, the council vowed to take Cox through the costly and time-consuming federally mandated license-renewal process.

The result of that process could be denial of Cox's franchise renewal and the city seeking another cable provider — although people on all sides say that's unlikely and would lead to litigation.

The council listed concerns about public access channels, the proposed length of the agreement, new public channels for education, the "digital divide" that would charge non-digital users higher bills to get access channels, unpaid license fees and issues with providing cable for schools.

FCC ruling helps AT&T; upsets towns

By Anna Marie Kukec (12.28.06)
http://www.dailyherald.com/search/searchstory.asp?id=264177

The National League of Cities and the Illinois Municipal League are upset with recent FCC rulings and are likely to sue the federal agency for overstepping its boundaries.

The National League of Cities and the Illinois Municipal League said the FCC’s decision blocks local governments from exercising their franchising process, earning revenues, offering services to all residents and protecting public rights of way.

“We believe the FCC has overstepped its authority,” said Ken Alderson, executive director of the Illinois Municipal League.

The FCC last week ruled municipalities cannot unreasonably refuse companies from competing with cable operators. This includes unreasonable requests for “in-kind” payments that attempt to subvert the 5 percent cap on franchise fees, drawn-out local negotiations with no time limits and other situations.

The towns contend AT&T is required, just like Comcast, to follow the same franchising process, pay the same fees for public rights of way, allow for services to all residents regardless of ability to pay and provide local access channels.

AT&T has argued it’s not a cable company and shouldn’t be treated like one.

Peter Collins, information technology manager for Geneva, and Gary White, media manager for Wheaton, said their towns still need to review the FCC order, expected in about a month, before determining what it means to their franchising process and to the AT&T lawsuits.