Tuesday, August 28, 2007

Another Glitch: Not Vonage's Fault


So here's a prediction: third quarter additons of a wide range of products ranging from cable modem to satellite TV to VoIP service will be lower than expected, or at the very least pushed towards the last month of the quarter, despite the normal lift provided by millions of college students returning to school. The reason? Not the economy, necessarily. Not a slowdown in new household formation. Not fewer college students returning to campuses.

Of all things, the slowdown will come from the perhaps unexpected shut down of a widely-used in-store-activation service supporting sales of Verizon, at&t, Comcast, Time Warner, Cox Communications, Time Warner, DirecTV, Clearwire, Covad, HughesNet and other major service provider retail sales efforts. Oh, and Vonage.

Boston-based GetConnected Inc., a maker of transaction processing platforms for broadband service providers,

abruptly closed its doors in mid-August, leaving Circuit City, Best Buy and Radio Shack without a way to do in-store

activations of Vonage accounts. With predictable results.

That doesn't mean customers can't activate, simply that they can't activate in the store. And in some cases, the hassle factor is high enough that retailers, such as Circuit City, have simply opted to stop selling products requiring in-store activation, such as Vonage. The problem, apparently, is that the in-store-activation process is the only way to get Vonage when sold by Circuit City. There is not after-market activation process to default to.

So Circuit City, for its part, has stopped selling Vonage, either in its retail locations or online.

GetConnected executives blamed an unexpected and "faster than usual" downturn in broadband sales. I'm not sure I buy that explanation. However, if true, it might suggest a broader slowdown in uptake of a wide range of consumer communications and entertainment services, as the company had worked for quite a roster of "Blue Chip" clients.

Those customers included Comcast, at&t, Verizon, DirecTV, Clearwire, Charter Communications, Covad, Cox Communications, HughesNet, Timewarner, Cox Communications . and Time Warner Cable.

Presumably the bankruptcy has had a similar effect on sales of Digita Subscriber Line, cable modem and DirecTV subscriptions in retail stores as well, though customer service and activation teams have more than a month to get the backlog cleared.

Most of the majors seem to also be partnered with Synchronoss Technologies for automated ordering of a variety of services including VoIP, mobility services, cable TV and wireline phone service. The big lift for Synchronoss is that it supplies activation for at&t iPhone sales. That's as much as 68 percent of total company revenue at the moment. With the demise of GetConnected, we'd expect more diversification of Synchronoss revenue streams.

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