Four More VoIP Patent Infringement Suits

As many of us had feared, if Vonage is infringing patents, why aren't other independent VoIP providers doing so as well? Well, we now have a possible answer. Sprint Nextel Corp. is suing four competitive VoIP providers for the same patent infringements Vonage has been found to infringe. Sprint has sued NuVox Communications, Broadvox Holdings Paetec and Big River Telephone Co.

On the heels of Verizon's new lawsuit against Cox Enterprises for VoIP patent infringement, we might be seeing the materialization of the threat. Executives in the competitive VoIP community have privately worried about just such a turn of events for some time. It now looks as though those fears are justified.

Justin McLain, Endeavor Telecom CEO, partly in jest (but only partly) recently said at a panel at the Internet Telephony Expo that any independent, "over the top" VoIP provider had better have all the funding they need for 24 months, because if not, the companies will fold within that period. "You might want to look for another job," McLain said, again partly in jest, but only partly.

Competing against well-established providers who own their own access facilities and have huge customer bases, plus the ability to bundle entertainment video and broadband access or mobile services simply is going to be too tough, at least in the consumer market segment.

"No bring your own broadband provider really is successful," McLain said. In fact, a good part of any independent provider's success in the consumer market is driven to a large extent by customers who recently have immigrated to the United States and have high needs for international calling back to their home countries, McLain says.

Some other part of the market is composed of price-conscious callers, but the problem is that the average revenue per user a provider can generate from that segment is not enough to support a business, says Sanford McMurtree, RNK Communications VP.

Among the other possible changes in strategy are a shift to multi-level marketing on the Amway pattern, says Gary Coben, deltathree director. "For all the money spent marketing VoIP services, there aren't that many customers," Coben says. "That means people aren't comfortable buying."

It looks to be a tough year for independent VoIP providers who cannot reposition from a consumer focus to serve smaller business customers.