SOURCE: Pike & Fischer

March 29, 2007 12:39 ET

Patent Litigation to Crush Independent Broadband Phone Services, Report Predicts

SILVER SPRING, MD -- (MARKET WIRE) -- March 29, 2007 -- The ongoing patent dispute between Verizon and Vonage signals the looming end of independent Internet phone providers as a major force in the residential voice business, market research provider Pike & Fischer concludes in a new report.

The two companies have been locked in a lawsuit over the use of technology that connects Internet phone calls to traditional phone lines, and Vonage faces similar complaints from other companies -- including Sprint. Publicity over the patent disputes will leave many customers skeptical about the future of Vonage, a company already suffering from slowing subscriber growth and ongoing financial problems, Pike & Fischer says in its analysis.

The litigation also raises concerns about intellectual property suits being filed against other independent broadband phone providers, such as Skype and SunRocket, says Scott Sleek, director of P&F's Broadband Advisory Services and author of the report. Those concerns will prove to be a boon to the cable industry, Sleek said.

"These lawsuits will prompt more and more consumers to migrate to cable digital phone services, which have not been subject to the same type of patent disputes that have plagued services like Vonage," he said. "Cable operators will pick up the vast majority of the customer base and eventually force most of the independent providers out of the market."

Verizon says it has lost hundreds of thousands of customers to Vonage, which pioneered the delivery of low-cost phone service using technology known as Voice over Internet Protocol (VoIP). But despite crippling Vonage as a competitor, Verizon won't become a major force in the VoIP business, P&F says. The company has had tepid success with its own Internet phone service, VoiceWing, and now focuses on selling its traditional phone service in discount bundles, the report concludes.

Pike & Fischer, a BNA company, offers a host of legal and business information products covering the telecommunications industry. "Verizon vs. Vonage: What It Means for Residential VoIP Service" is priced at $695 and can be purchased at www.broadbandadvisoryservices.com. For analyst commentary or an executive summary, contact Scott Sleek at 800-255-8131 / ssleek@pf.com.

For more information about Pike & Fischer's Broadband Advisory Services, visit www.broadbandadvisoryservices.com or contact Jonathan Wentworth Ping at 212-576-8741 / jping@pf.com.

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