Vonage 2008 Annual Report Download - page 15

out needing to speak to a customer care representative. Ou
r
customers can manage almost all aspects of their account
s
online. This capability both empowers our customers throu
g
h self
-
s
ervice and reduces our customer care expenses.
C
ustomers who cannot or do not wish to resolve their
q
ues
-
ti
ons t
h
rou
gh
our we
b
s
i
te can contact a
li
ve customer care repre-
s
entative through our toll
f
ree number. We sta
ff
our customer car
e
h
otline through a combination of our own employees and out-
s
ource
d
customer care representat
i
ves.
All
new customer car
e
r
epresentatives are trained thro
u
g
h an established program devel
-
ope
db
y
V
onage.
W
ea
l
so
h
ave a separate team ca
ll
e
dAd
vance
d
Technical
S
upport for resolvin
g
c
ustomers
’
comp
l
ex
i
ssues t
h
at
could not be handled b
y
our other representatives. We use
extensive monitoring of call quality and customer satisfactio
n
s
cores to
d
eterm
i
ne a
ddi
t
i
ona
l
tra
i
n
i
n
g
or coac
hi
n
g
requ
i
rements
f
or individual emplo
y
ees.
Billi
n
g
All
customer
billi
n
gi
s automate
d
t
h
rou
gh
our we
b
s
i
te.
We
automaticall
y
collect all
f
ees
f
rom our customers’ credit card
,
debit card or ECP. By collecting monthly subscription fees i
n
advance and certain other char
g
es immediately after they are
i
ncurred, we are able to reduce the amount o
f
accounts receivabl
e
t
hat we have outstanding, thus allowing us to have lower working
capital requirements.
C
ollectin
g
in this manner also helps us miti
-
g
ate bad debt exposure, which is recorded as a reduction t
o
r
evenue. If a customer’s credit card
,
debit card or ECP i
s
d
ec
li
ne
d
,we
g
enera
ll
y suspen
di
nternat
i
ona
l
ca
lli
n
g
.
Hi
stor
i
ca
ll
y
,
i
n most cases, we are a
bl
e to correct t
h
e pro
bl
em w
i
t
h
t
he
customer within the current monthly billing cycle. I
f
the custom
-
er’s credit card, debit card or E
C
P cannot be successfully proc
-
essed durin
g
three billin
g
cycles (i.e. the current and tw
o
s
ubsequent monthly billing cycles), we terminate the account
.
INTELLECTUAL PROPERTY
W
e
b
e
li
eve t
h
at our tec
h
no
l
o
gi
ca
l
pos
i
t
i
on
d
epen
d
spr
i
mar
ily
on the experience, technical competence and the creative abilit
y
of our engineering and technology staff. We review our techno-
l
o
g
ical developments with our technolo
g
y staff and business unit
s
t
o identi
f
y the
f
eatures o
f
our core technolo
g
y that provide us wit
h
a technological or commercial advantage and file patent applica
-
t
ions as necessary to protect these features in the United
S
tates
and internationall
y
. Our compan
y
policies require our emplo
y
ees
t
o assign their intellectual property rights to us and to treat all
t
echnolo
g
y as our confidential information. We have been issue
d
t
hree patents and have
f
iled several other patent applications t
o
p
rotect our technology, which are currently pending.
I
na
ddi
t
i
on to
d
eve
l
op
i
n
g
tec
h
no
l
o
g
y, we eva
l
uate t
h
e
li
cens
-
i
ng and acquisition o
f
intellectual property o
f
others in order t
o
i
dentify technology that provides us with a technological o
r
commercial advanta
g
e. In 2006, we acquired three patents from
Digital Packet Licensing Inc. that enable VoIP technology. Th
e
p
atents are related to the compression of packetized digita
l
s
i
g
nals commonly used in VoIP technolo
g
y. Two of the patent
s
h
ave expired, and the other patent expires in 2013
.
W
e were named as a defendant in several suits that relate t
o
p
atent in
f
rin
g
ement and entered into settlement a
g
reements t
o
s
ettle certain o
f
the suits, which in certain cases include pa
y-
m
ents,
p
atent
li
censes an
d
covenants not to sue
.
W
ea
r
e
th
eo
wn
e
r
of
n
u
m
e
r
ous
tr
ade
m
a
rk
sa
n
dse
rvi
ce
m
a
rk
s
a
nd have applied
f
or registration o
f
our trademarks and servic
e
marks in the United
S
tates and abroad to establish and
p
rotect
o
ur brand names as part o
f
our intellectual property strate
g
y
.
S
ome of our registered marks include Vonag
e
®
,
Redefinin
g
C
ommunication
s
®
,V
ona
g
e
Digi
ta
lV
o
i
c
e
®
a
n
dV
ona
g
e
Th
e
Broadband Phone Compan
y
®
.
These registered marks have a
d
uration of five years from the date they are registered
.
W
een
d
eavor to protect our
i
nterna
lly d
eve
l
ope
d
s
y
stems an
d
maintain our trademarks and service marks. T
y
picall
y
, we ente
r
i
nto confidentiality or license agreements with our employees
,
c
onsultants, customers and vendors in an effort to control access
to and distribution o
f
our technology, so
f
tware, documentation
a
nd other information
.
COMPETITION
We
f
ace stron
g
competition
f
rom incumbent telephon
e
c
om
p
anies, cable com
p
anies, alternative voice communication
p
roviders and wireless companies. Because most of our tar
g
et
c
ustomers are already purchasin
g
communications services
f
ro
m
o
ne or more o
f
these
p
roviders, our success is de
p
endent u
p
o
n
o
ur ability to attract these customers away from their existin
g
p
roviders. We believe that the principal competitive
f
actors a
ff
ect-
i
ng our ability to attract and retain customers are price, call qual-
i
ty, re
li
a
bili
ty, customer serv
i
ce an
d
en
h
ance
d
serv
i
ces an
d
fea
t
u
r
es.
I
ncum
b
ent te
l
ep
h
one compan
i
e
s
Th
e
i
ncum
b
ent te
l
ep
h
one compan
i
es are our pr
i
mary com
-
p
et
i
tors an
dh
ave
hi
stor
i
ca
ll
y
d
om
i
nate
d
t
h
e
i
rre
gi
ona
l
mar
k
ets
.
T
hese competitors include AT&T, Qwest Communications and
V
erizon
C
ommunications as well as rural incumbents
,
such a
s
Frontier
C
ommunications. These competitors are substantiall
y
l
ar
g
er and better capitalized than we are and have the advanta
g
e
o
f a large existing customer base. In addition, many users of
tra
di
t
i
ona
l
p
h
one serv
i
ce w
h
om
igh
tot
h
erw
i
se sw
i
tc
h
to our serv
-
i
ce ma
y
believe that the
y
cannot cancel their traditional phone
s
ervice without also losing their broadband DSL service. While a
majority of broadband users today subscribe to cable mode
m
s
ervice, recent trends su
gg
est that DSL providers are
g
ainin
g
b
roadband market share. Others are not willing to install a
V
ona
g
e-enabled device, accept the limitations of our emer
g
enc
y
c
allin
g
service or
f
or
g
o service durin
g
power outa
g
es. Be
f
or
e
s
ubscribing to our service, a substantial majority o
f
our new cus-
t
o
m
e
r
s
m
us
t fir
s
t
dec
i
de
t
o
t
e
rmin
a
t
e
th
e
ir
se
rvi
ce
fr
o
mth
e
i
r
i
ncumbent telephone compan
y
or pa
yf
or our service in additio
n
to their existing service.
In many cases, we char
g
e prices that are si
g
nificantly lowe
r
than prices char
g
ed by the incumbent phone companies. We
b
elieve that we currently compete successfully with th
e
i
ncumbent
p
hone com
p
anies on the basis of the features we offe
r
that the
y
do not (such as area code selection and virtual phone
numbers
)
and features we offer at no extra charge. However, th
e
a
bility of telephone companies to offer D
S
L last mile connection
s
has si
g
ni
f
icantly enhanced their ability to compete with us on th
e
b
asis of
p
rice and features.
Th
e
i
ncum
b
ent p
h
one compan
i
es own networ
k
st
h
at
i
nc
l
u
d
e
a
“last mile” connection to substantially all o
f
our existing and
p
otent
i
a
l
customers as we
ll
as t
h
e
pl
aces our customers ca
ll
.
A
sa
7