Thanks, but no thanks

Garrett Smith over at Smith on VoIP says We All Owe Vonage A Thanks. In many ways he is right and his post is worth a read. It’s something that needs to be said.

However, that said, I have another perspective (surprise, surprise). While much of what Garret says is true, the net result of Vonage on the industry and on consumers has been overwhelmingly negative.

Four Things I Hate About You

First, Vonage contaminated the VoIP investment pool back in 2003. Once Vonage succeeded in selling their bogus story of “disruption” and became the darling of VoIP, any models contrary to the Vonage approach (technically or business-wise) were summarily rejected. Many well known giants of industry hailed Vonage as a miraculous revolution. Investors were infatuated. The press followed. Nobody seemed to stop and look a little deeper to see what road we were really taking.

Second, Vonage ruined the retail environment for VoIP. They tainted the supply chain by entering into unsupportable (and downright silly) deals, essentially buying shelf space at far above market rates. VoIP got tagged as suckers and now the retail giants assumed they could make the same one-sided deals with every Tom, Dick, and Harry VoIP service provider. Of course, the products never sold very well at retail – but that’s not important to the retailers when the manufacturer is paying those kind of fees just for the box sitting on the shelf. Vonage overpaid for everything in the value chain, and must have been the butt of countless jokes among hardware manufacturers, distributors, and retailers.

Third, Vonage defined VoIP in a very anti-consumer and anti-Internet way. The vast amounts of money they have spent educating the market, the press, analysts etc. have caused incredible damage to the industry. Parrots like bloggers, analysts, and other “experts” added credibility to Vonage’s tales of erroneous information, because they in fact have no clue, especially technically. They were all fooled, even the well-respected ones, so don’t feel too bad if you were too.

Finally, once Vonage started to struggle and fell from grace, they ruined the investment environment for a second time. When their flawed ideas and business economics turned out to be, guess what, flawed, just as we knew they were – VoIP at large suffers. As goes Vonage, so goes VoIP.

Summary

I’d argue that these Vonage effects have set VoIP back for perhaps a decade, maybe more, assuming it will ever resurface in a form that has value to end-users. As it is, it is going more in the direction of the the mobile phone business, closed and hostile to end-users, than like the Internet, or what VoIP could be.

In the mean time, everything people know about VoIP, that they learned from Vonage, has to be un-learned. Instead of being educated about SIP, ENUM, open-standards, interoperability, and the fact that we don’t need a “phone company” at all, we’ve learned that VoIP works just like the old phone system, with the same fee structures. Instead of learning that VoIP is just another Internet application and calls could be passed just like email, across domains, at no charge, Vonage has spent a few billion dollars inventing their own definitions for how VoIP works.

In large part because of Vonage (although Skype is equally guilty here), we have made almost no progress toward a free, interoperable VoIP environment where phone calls are passed like email across providers as a part of basic Internet service.