Global Crossing Didn't Do It

TeleBlend's VoIP network had an outage in late July and there was some confusion about why. Perhaps it was as simple as a temporary financial issue between trading partners. Global Crossing and Level 3 Communications, as major suppliers to SunRocket, likely got stuck with significant bad debt when SunRocket went dark. So you might understand why the providers might be worried about further bad debt exposure related to an account that had just gone south.

In all likelihood there was simply a period where a single payment got a bit delayed and at least one of the underlying carriers moved to protect themselves. We understand TeleBlend had been making incremental payments to the underlying carriers, obviously to limit their risk.

That's not to say there couldn't have been issues related to the SunRocket and TeleBlend back office processes. Under the circumstances, a late payment makes the most sense.

TeleBlend Quietly Provides SunRocket Service

If you have been following the SunRocket transition story, you might not have wondered just how it was that SunRocket went dark July 16, but nearly all SunRocket customers were still able to call in and out and use voice mail until the SunRocket creditor hard stop of Aug. 5. As it turns out, TeleBlend has quietly been paying Global Crossing and Level 3 Communications, as well as some others, to maintain service to all former SunRocket customers while TeleBlend conducted its marketing activities.

And the only reason TeleBlend wanted to keep that quiet was to avoid its own customer backlash. How's that? Customers are mad at SunRocket. If they then learn they are getting service from TeleBlend, even if free, there's still the possibility of ill will when the lights finally do have to go out at SunRocket. So TeleBlend said nothing.

Where Have SunRocket Customers Gone?

TeleBlend, the new provider formed to serve former SunRocket customers, says it has 60,000. CEO Bill Fogg says TeleBlend added 3,000 the week of Aug. 6 and 1,000 on Thursday, Aug. 9. Vonage says it has gotten about 20,000 and Packet8 says it also has gotten about 20,000, according to Huw Rees, 8x8 VP. That accounts for about half the former SunRocket base. And there may be significant movement this week and next. As it turns out, nearly all former SunRocket customers have quietly continued to get service that has been paid for by TeleBlend. So as service has gone completely and finally dark on Aug. 5, people who might have done nothing because they were still able to use their SunRocket service will have to do something else, for real.

SunRocket to Packet8 Transition: Why it is so Easy

Most former SunRocket customers who have moved to Packet8 service have had their new service up and running within three days, says Huw Rees, 8x8 VP. So why is the Packet8 service faring better than TeleBlend, in terms of transition ease?

Serendipity, at least in part. Global Crossing and Level 3 Communications were the primary SunRocket transport providers, and Packet8 works with both of them as well. So when a former SunRocket customer wants to switch to Packet8 service, pretty much all it takes is the letter of authorization, about 24 to 48 hours to get the account re-pointed to Packet8 and away from SunRocket, and time to ship out a new analog terminal adapter.

That's not to minimize the face that 8x8 has had quite some years to get its back office and warehouse operations into place. It's just that having common transport providers in common with SunRocket has made the logistical process of "porting" accounts easier.

Remarkable Calm Despite TeleBlend Snafus

Given all the challenges new VoIP provider TeleBlend has faced since deciding to make a major play as a continuity provider for former SunRocket customers, including at least one significant service outage in the first couple of weeks, there isn't much squawking by disaffected customers in the blogosphere. It's somewhat odd. For an operation that jump started itself fast, and then had to transition customers from another provider, there were bound to be transition problems. Billing issues here and there, administration portals not displaying real time data, password issues or adapter resets were almost certainly to be expected.

Having worked at start up operations where we had to support Cisco networking gear, Nortel phone systems and the circuits to support them, I know what it is like when all the systems are not fully baked. And, in fairness, there is simply no way TeleBlend was going to have its back office fully baked before stepping right into the customer support morass.

I'll be willing to bet, however, that I've encountered more software problems setting up a new Vista PC than most SunRocket customers have had getting their transitioned services to work.

Maybe customers are more unhappy than they appear to be expressing. If so, we'd like to hear about it. But we aren't hearing all that much. Which might simply mean most users might have encountered a glitch here and there, but that service for the most part is working the way it was before.

The adage we are fond of repeating is simply that customer satisfaction and loyalty do not correspond all that well for mass market communication services. Happy customers will desert. Conversely, it is well worth noting, somewhat unhappy customers will not necessarily churn. I wouldn't say I am happy having to use Vista. Neither would I say I am ditching Windows for a Mac, though I have been considering it for at least a year.

Maybe I'm just not hearing what is going on in SunRocket land. But I am neither surprised there have been porting and support issues, nor concerned TeleBlend will fail to get its operational processes in enough order to support the services and price points it has chosen. How much support can a user really expect for a $12.95 a month service? That's no slam on TeleBlend; just a recognition that price points that low will not allow for much support infrastructure.

Still, I have been surprised at the relative calm, despite all the difficulties.

TeleBlend: More Steps to Ensure SunRocket Transition

In an effort to ensure it has the resources in place to manage a fairly sizable inflow of former SunRocket customers, should that occur, TeleBlend executives have signed an agreement with Sherwood Partners, the entity winding down SunRocket, for hardware and software assets that will make any customer transition seamless.

TeleBlend, a “preferred” provider for former SunRocket customers, is offering these customers a heavily discounted monthly subscription rate of $12.95 for the duration of their previous annual contract with SunRocket.

We won't know more until this afternoon, but it seems logical to assume the deal gives TeleBlend ensured access to in-service analog terminal adapters and the provisioning and operating systems used to keep them in service, at least through any transition period where customers are moved over the existing TeleBlend back office and network.

The agreeement does not seem to affect the earlier "preferred supplier" deals Sherwood struck with Packet8 and TeleBlend.

SunRocket, Vonage Not the Whole Story

As much as people think VoIP providers (other than cable) have got traction problems in the U.S. market, that is far from the case elsewhere. In western Europe, for example, independent VoIP providers are not only the market share leaders, but their share of market might actually be increasing, even though major incumbent telcos are actively in the market as well.

And where U.S. cable providers including Comcast, Cox, Time Warner and Cablevision are the new driving force for VoIP-driven POTS replacement, that is hardly the case in western Europe, where cable operators still have relatively slight market share.

Still, there is no denying the traction problem. According to analysts at TeleGeography, VoIP growth already has hit a plateau in the U.S. market. In western Europe growth rates not only have accelerated but might not hit a peak until 2008, says TeleGeography.

Hence the interest in VoIP 2.0, the integration of voice services with Web and enterprise applications, portals, email, documents, gaming and other end user experiences.

SunRocket, Ooma, Verizon, Vodafone, at&t

So the VoIP blogging community is talking about almost nothing but Ooma this morning. But as I mentioned on my other blog (www.ipbusinessmag.com), focusing so much energy on SunRocket's travails, which was the other recent item everybody was talking about, though obviously of high interest, has almost no strategic implications for the broader communications industry. Rumors that first had Vodafone pondering buying Verizon, though almost certainly an investment banker's trial balloon, are something else.

Today Andy Abramson says his sources say it actually is at&t that is talking about buying Vodafone. Now that would be quite a deal. And while this particular rumor also could be the result of an investment banker's strategy, it does fit quite well what new at&t CEO Randall Stephenson has been saying about at&t. It is a "wireless company" that has no intentions of abandoning its grow by acquisition strategy.

Ooma is interesting. What happened to SunRocket also is a high interest event. But neither is going to have truly strategic direct implications for the global VoIP industry. Whatever one might say about the particularities of the U.S. VoIP industry, VoIP continues to grow on a global basis, almost mechanically.

Wireless increasingly is the way voice gets done. Social networking portals, instant messaging and enterprise apps also are emerging ways voice and communications gets done. All of that is a really big deal.

SunRocket post mortem

Chris Koehncke, a former SunRocket excutive now back at BroadSoft, has this to say about what went wrong at SunRocket (I'm not so convinced the customer acquisition strategy was necessarily so doomed to failure, but more on that later): "It appears that SunRocket was indeed acquired and with it the vast majority of the remaining employees unceremoniously laid off sans a small group of 15-20 of the folks necessary to keep the network alive. SunRocket network suppliers were notified late Friday so they wouldn't turn them off.

With 200k subscribers and say a $40m revenue base, if they simply stop marketing, give crappy customer support and run it on a shoestring -- it's a nice little pocket business. Playing in the fringes.

In hindsight, it was kinda of crazy to spend $200+ to acquire a customer whose annual spend was only $200+. Hard to outrun the economics. The hopes, of course, was that if you reached a decent size, people would come to you and you could reduce your marketing costs. Vonage certainly hasn't seen this, so SunRocket wasn't going to be much better.

Customer service cost also can eat you alive. Anytime you call for customer service, figure it's costing that company between $0.75 and $1.00 PER MINUTE to talk to you. For a typical 10 minute call that's $8-10. Call twice in a month and for a SunRocket $17 a month revenue, they lost money on you. It's also amazing the number of people who buy cheap are also the same group who complain constantly. They want it all and they're willing to bitch about it.

Sprint's decision to whack 1000 customers who were constantly calling customer support (I suspect their initial list had 10k names on it) is wise. Perhaps, SunRocket simply should not have had telephony support at all and just offered email support.

Some folks have just crappy internet service and SunRocket was never going to fix that. Perhaps after 3 customer support calls, SunRocket should have pro-actively canceled the customer's account. Why keep a customer that will never be happy?

Perhaps rather than being a nationwide telephone service, SunRocket should have focused on a specific region or vertical consumer group. Better targeting their marketing spend and creating a reputation in a specific niche.

VC's are an inpatient lot. They give a start-up money and urge them to spend it as fast as possible and grow as quickly as they can. In doing that, the start-up makes mistakes, does stupid things, hires the wrong people, it's a wild ride for sure. VC's don't mind failures, that's the business they're in, but if it's going to fail, they want it fail fast so they can move on to the next hot idea. SunRocket had to build a complete telephone company literally overnight with hundreds of moving parts so it's not surprising mistakes were made.

The genesis of the idea of SunRocket is still valid, create something different that people will be loyal to and ultimately becomes virally marketed. But by buying off the shelf VoIP and traditional telecom products the ability to differentiate the service, other than with a pricing model, was nil. You can't buy innovation in a catalog."

Lights Out for SunRocket?

SunRocket appears to be refusing to accept new customers. Try calling the call center to sign up. Vonage apparently has offered to buy SunRocket for no cash, simply to provide continuity of service. No word on any response from SunRocket. A couple more bidders, said to be undercapitalized themselves, also are poking around. Not a happy day, at all.

The Good News for SunRocket....

..could be that its recent round of layoffs was a prelude to a new round of funding. SunRocket has raised approximately $20 million in additional venture capital from existing investors since early spring, bringing the company's total capital raised to date to about $100 million, the company says.

The company is likely to close the new funding round by August with a total of $30 million to $40 million in new venture capital, says Jonathan Ebinger of BlueRun Ventures, one of SunRocket's investors.

SunRocket Axes Most of its "C" Titles

Andy Abramson says he also has gotten confirmation that SunRocket has laid off its gets CTO, CIO, CFO and CPO. The founders, including Paul Erickson, Joyce Dorris and Chris Koehncke all left in February. It's a shame. The founders had brought some of that old MCI marketing flair to the independent VoIP space.

Layoffs at SunRocket

SunRocket apparently has laid off a third of its workforce; between 40 and 60 people, sources say. The independent VoIP provider has been trying to raise another round of funding, and the effort appears to have failed, up to this point.