How Vonage Dominated VoIP

By Jonathan Baldwin

Vonage came on early on into the Voice over IP market. With a combined strategy of over-aggressive marketing and crafty promotional methods, Vonage took control of the VoIP industry.

Simply put, Vonage hyped up their product, which earned them some modest number of subscribers, which gave them the ability to secure even more loans to advertise their products even more aggressively. A cycle of borrowing money to advertise services which then grew larger and then gave them the ability to borrow more money and repeat the cycle.

Beating out competitors such as SunRocket, Vonage left no room for the other VoIP services to breathe, squashing them out very quickly. The competitors were forced to drastic measures, promising ridiculously low amounts in order to try and win over some customers. SunRocket, for example, resorted to offering one year free when customers bought buy one year in advance. Of course, these types of promises lead to an inability to profit for Vonage's competitors. SunRocket would collapse under the pressure of the year that was ahead of them, in which a majority of customers would have already paid for service and get the next year free. This led the second place competitor to collapse.

Eventually Vonage grew to become a behemoth, with millions of customers but also with the largest amount of debt in the industry by far and to an unsustainable point. The founder Jeffrey Citron was also the subject of a securities fraud investigation. It is amazing how little attention has been brought onto this fact, either in the media or within the VoIP industry. The combined practices of Datek Securities, Citron's former company, and Vonage seem to outline what appears to be a consistently fraudulent behavioral pattern. The SEC filed suit against Citron's Datek Securities Corporation, and claimed this in their filing

"By fraudulent means, defendants Sheldon Maschler, Citron, McCarty, Erik Maschler, and Heartland used the SOES system to execute millions of proprietary trades, resulting in tens of millions of dollars in illegal profits. The great majority of these profits were paid to Sheldon Maschler and Citron, but other defendants profited as well. The fraudulent scheme was carefully planned and orchestrated, and was concealed from regulators through the use of sophisticated software, the creation of nominee accounts and fictitious books and records, and the filing of false reports with the Commission."

Jeffrey Citron agreed to pay $29.2 million in fines, which is a sort of tacit omission of guilt. He was subsequently banned from the industry forever. Fast forward a decade, and Jeffrey proceeds to hype up his new Vonage company, which then proceeds to over market their product acquiring massive debt, and hype up an IPO which rises quickly, only to have it's value collapse under the mountain of debt facing the company.

Article Source: http://interpret.co.za

About The Author
The author runs a VoIP Reviews website, where you can find a VoIP comparison guide, reviews, news, as well as this article, How Vonage Dominated VoIP.