Vonage 2008 Annual Report Download - page 16

r
esult, the vast majority o
f
the calls placed by a Vonage customer
are carried over the “last mile” by an incumbent phone company
,
and we indirectly pay access char
g
es to these competitors fo
r
each o
f
these calls. In contrast, traditional wireline providers do
n
ot pay us when their customers call our customers. Their “las
t
mil
e
”
connect
i
ons ena
bl
et
h
ese com
p
et
i
tors to
b
un
dl
e
ph
on
e
s
ervice with Internet access and television at prices we ma
yf
in
d
di
ff
icult to com
p
ete with
.
Th
e
i
ncum
b
ent
ph
one com
p
an
i
es, as we
ll
as t
h
eca
bl
e
companies, have lon
g
-standin
g
relationships with re
g
ulators,
legislators, lobbyists and the media. This can be an advantage
f
o
r
th
em
b
ecause
l
e
gi
s
l
at
i
ve, re
g
u
l
atory or
j
u
di
c
i
a
ld
eve
l
opments
in
our rapidly evolvin
g
industry could have a ne
g
ative impact on us
.
Cable com
p
anies
These com
p
etitors include com
p
anies such as
C
ablevision
,
C
omcast Corporation, Cox Communications and Time Warne
r
C
able
(
a division of Time Warner Inc.
)
. Cable com
p
anies hav
e
s
i
g
nificant financial resources and have made and are continuin
g
t
o make substantial investments in deliverin
g
broadband Interne
t
access and phone service to their customers. Providing Internet
access and cable television to many of our existin
g
and potentia
l
customers allows them to en
g
a
g
einhi
g
hly tar
g
eted, low-cost
direct marketing and may enhance their image as trusted pro
-
v
i
de
r
so
f
se
rvi
ces.
C
able companies are also a
gg
ressively usin
g
their existin
g
customer relationships to bundle services. For example, they
b
un
dl
e
I
nternet access, ca
bl
ete
l
ev
i
s
i
on an
dph
one serv
i
ce w
i
t
h
a
n
i
mplied price
f
or the phone service that may be si
g
ni
f
icantly below
ours. They are able to advertise on their local access channel
s
with no si
g
nificant out-of-pocket cost and throu
g
h mailin
g
s in bill
s
w
i
t
hli
tt
l
e mar
gi
na
l
cost.
Th
ey a
l
so rece
i
ve a
d
vert
i
s
i
n
g
t
i
me as par
t
o
f
their relationships with television networks, and the
y
are able t
o
u
se this time to promote their telephone service offerings
.
M
an
y
ca
bl
e compan
i
es sen
d
tec
h
n
i
c
i
ans to customers
’
prem-
i
ses to initiate service. Although this is expensive, it also can b
e
m
ore attract
i
ve to customers t
h
an
i
nsta
lli
ng t
h
e
i
r own router.
I
n
addition, these technicians ma
y
install an independent source o
f
p
ower, which can give customers assurance that their phon
e
s
erv
i
ce w
ill
not
b
e
i
nterrupte
dd
ur
i
ng power outages.
C
able companies’ ownership of Internet connections to our
customers could enable them to detect and inter
f
ere with th
e
completion of our customers’ calls. While we are not aware of an
y
occurrence,
i
t
i
s unc
l
ear w
h
et
h
er current re
g
u
l
at
i
ons wou
ld
per-
m
it these companies to degrade the quality o
f
, give low priority t
o
or block entirely the information packets and other data w
e
t
ransm
i
t over t
h
e
i
r
li
nes.
I
na
ddi
t
i
on, t
h
ese compan
i
es ma
y
attempt to char
g
e their customers more
f
or usin
g
our services
.
This could also apply to phone companies that connect our cus
-
to
m
e
r
s
t
o
t
he I
nt
e
rn
e
t.
W
e believe our abilit
y
to success
f
ull
y
compete with cable
companies is enhanced by the
f
eatures we o
ff
er that cabl
e
com
p
anies do not offer
(
such as
p
ortable service and wide choic
e
of area codes) and because our national presence makes us more
attractive to national retail outlets and allows us to more e
ff
icientl
y
p
urc
h
ase nat
i
ona
l
a
d
vert
i
s
i
n
g
.
W
ireless tele
p
hone com
p
anie
s
We also compete with wireless phone companies, such a
s
AT&T,
Sp
rint, T-Mobile and Verizon Wireless.
S
ome consumer
s
use wireless phones, instead of VoIP phones, as a replacemen
t
f
or a wireline phone. Also, wireless phone companies increasingl
y
a
re prov
idi
ng w
i
re
l
ess
b
roa
db
an
dI
nternet access to t
h
e
ir
c
ustomers and ma
y
in the future offer VoIP to their customers. As
w
ireless providers o
ff
er more minutes at lower prices and com
-
p
an
i
on
l
an
dli
ne a
l
ternat
i
ve serv
i
ces, t
h
e
i
r serv
i
ces
h
ave
b
ecom
e
more attractive to households as a competin
g
replacement for
w
ireline service. Wireless telephone companies have a strong
retail presence and have significant financial resources.
Al
ternat
i
ve vo
i
ce commun
i
cat
i
on prov
id
er
s
W
ea
l
so compete a
g
a
i
nst esta
bli
s
h
e
d
a
l
ternat
i
ve vo
i
c
e
c
ommunication providers, such as Sk
y
pe (a service of eBa
y
Inc.)
,
magicJack and independent VoIP service providers. Some of
these service
p
roviders have chosen to sacrifice revenue in orde
r
to
g
ain market share and have o
ff
ered their services at lowe
r
p
rices or for free. Google Inc., Microsoft Corporation and Yahoo!
Inc. also offer free instant messa
g
in
g
services that are voice
e
n
abled.
While not all of these competitors currently offer the ability t
o
c
all or be called by anyone not usin
g
their service, in the
f
utur
e
they may integrate such capabilities into their service o
ff
erings.
In addition, a continuin
g
trend toward consolidation o
f
tele
-
c
ommunications companies and the
f
ormation o
f
strategic alli
-
a
nces w
i
t
hi
nt
h
ete
l
ecommun
i
cat
i
ons
i
n
d
ustry, as we
ll
as t
he
d
evelopment of new technolo
g
ies, could
g
ive rise to si
g
nificant
new competition.
EMPLOYEES
As o
f
December 31, 2008, we had 1,491 employees. None o
f
o
ur emp
l
oyees
i
ssu
bj
ect to a co
ll
ect
i
ve
b
ar
g
a
i
n
i
n
g
a
g
reement.
AVAILABLE INFORMATION
W
e were
i
ncorporate
di
n
D
e
l
aware
i
n
M
ay 2000 an
d
c
h
an
g
e
d
o
ur name to Vona
g
e Holdin
g
s Corp in February 2001. We main-
tain a website with the addres
s
www.v
onage
.
com
. The
i
nformation contained on our website is not included as a
p
art of,
o
r incorporated b
y
re
f
erence into, this Annual Report on For
m
1
0-K. Other than an investor’s own Internet access charges, we
make available free of char
g
e throu
g
h our website our Annua
l
Report on Form 10-K, Quarterl
y
Reports on Form 10-Q and Cur-
rent Re
p
orts on Form 8-K, and amendments to these re
p
orts, a
s
soon as reasonably practicable after we have electronically file
d
such material with, or furnished such material to, the Securities
a
nd Exchange Commission
.
8
VO
NA
G
E ANN
U
AL REP
O
RT 2008