Vonage is in trouble with a capital T. We’ve known this for a while as their stock plummeted, riding the deflating tide of inertia that appeared to be forming behind them. Investors who put up fifteen bucks a share to buy Vonage into the public economy are pissed, and many of Vonage’s customers are pissed. Not surprising, considering they have no real control over quality, and their call center people are ignoramuses as cited many times before.

But I’ve got a ticket out of this mess for Jeffrey and the gang at Vonage.

Six months ago, I would’ve said, “Vonage, NOW is the time to innovate something compelling, something more than pizza box head butts and cute songs. NOW is the time to get ahead of your competitors and create that magic thing that has consumers flocking to you throwing their twenties and fifties at you, kinda like Apple.”

Well, not any more. Innovation, in my humble but informed opinion, can no longer save Vonage. Sure, they have a lot of cash in the bank (half a billion I believe). Sure, they own more VoIP lines than any other provider. Sure, they still have some marketing momentum, maybe. But without innovating a next-gen solution that does something NEW, they’re as good as dead. Things Vonage still doesn’t offer:

- SIP-based find-me-follow-me
- Open SIP access
- Simultaneous ring on multiple endpoints
- Configurable incoming call handling, a la Grand Central
- “Visual voicemail” (a la Grand Central)
- A realistic call-center / hosted PBX solution, a la Packet8
- QoS (not much to be done about that though)
- Installation support
- A significant co-marketing arrangement with somebody in the residential and business access business (Sorry Vonage, the Covad boat sailed away a few years ago…)

And these aren’t even things I would consider innovative. Cue BNL with “It’s all been done before”–because everything on that list, somebody else already has. So when you’re eating Vonage’s $25/month pitch promising “look at all these features”, don’t forget all the stuff you aren’t getting with your meal. No cornbread. No ranch dressing.
So with innovation clearly off the drawing board at Vonage HQ, one must find Little V’s ticket out of this mess in the realm of economics and politicking. Two of my favorite bloggers have two different opinions, but they both involve Vonage getting sold. Andy Abramson suggests that Vonage will sell to an incumbant, possibly Verizon, with a premium possibly sliced off the top due to the pending lawsuit award. Sprint is waiting in the wings with suits no-doubt being prepared as we speak, and if Vonage became Verizon’s property, a Sprint v. Verizon lawsuit would be a lot smaller threat to Vonage’s existing business. Russell Shaw, on the other hand, thinks Vonage should sell its stock back to private investors, for a seriously negative premium. Me, I wouldn’t let Citron anywhere near MY money, and that’s on the basis of Vonage’s performance alone.
Not sure who’s right here, but I can tell you this much. If I owned Vonage stock (which I don’t), I wouldn’t be too happy about sucking up $12 per share (or more) just to see my dotcom 2.0 darling survive and go on to do nothing for me and my portfolio.

So I’m inclined to agree with Andy that Vonage’s ticket out of this mess isn’t innovation or a private buyback, but rather a shameless sell-out. The Bells hold the key to Vonage’s survival.