Thursday, April 26, 2007

Vonage, Market Competition, and the Future of VoIP...

On Tuesday, a federal appellate court issued a temporary reprieve for Vonage - allowing the VoIP company to continue signing up new customers until the courts make a final ruling on whether or nor Vonage violated patents owned by Verizon in creating its service.

Here is why you should care. As this Wired article reports, if the court rules in favor of Verizon, it will directly affect the ability of most other VoIP providers to connect their services to the public telephone network. If Vonage or Skype, or smaller outfits like SunRocket and Packet8, cannot connect to the public telephone network, it will render them largely meaningless to the mass consumer telephony market.

When Congress passed the Telecommunications Act of 1996, the intention was to deregulate the telecom market and thereby increase competition. While this remains narrowly defined as a patent-infringement lawsuit, the consequences are more far-reaching - if Verizon wins they would be granted a virtual monopoly over telephony service in many American markets. Consumers would, as a result, be subject to higher prices and lower quality service.

VoIP from the beginning held tremendous potential for, not only offering new and better services, but also increasing competition against the traditional telecoms. Even if the court rules that Vonage violated Verizon's patents, let's hope that the ruling is worded in such a way as to not kill the mainstream consumer viability of VoIP technology.


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