SunRocket demise casts doubt on business model Page 2

Cable companies, for example, offer the so-called “triple-play” bundle of TV, broadband and VoIP telephone service. They also typically have the home field advantage of name recognition and customer access--the industry had around 68 million TV subscribers when it started marketing telephony, and it now has nearly 11 million VoIP customers.

SunRocket had to collect customers from scratch, and it spent upwards of $300 per to acquire subscribers, according to sources familiar with the company. (SunRocket representatives, including Martin Pichinson of Sherwood Partners, could not be reached to confirm the figure.

Sherwood of Palo Alto, Calif., is the liquidating agency.) If indeed SunRocket’s 200,000 customers cost it around $300 each, 75 percent of its reported $80 million venture cap went into customer acquisition.

The aftermath of SunRocket’s shutter also suggests just how hungry the VoIP industry is for customers. Companies came out of the woodwork to poach subscribers. Lingo, Broadvoice, Vonage, Net2Phone and ViaTalk were among a small swarm of standalones that reached out to the SunRocket stranded. Four days after service ceased, SunRocket subscribers were directed via e-mail to Unified Communications Corp.’s Teleblend and Packet8, the third largest VoIP standalone with 181,000 subscribers. (The Wall Street Journal reported that both would pay a fee to SunRocket creditors for each orphaned subscriber obtained.)

DEAD MODEL CLUB

SunRocket’s demise comes in the midst of a series of unfortunate incidents for Vonage, the nation’s most high-profile standalone VoIP provider.

A patent infringement lawsuit brought against it by Verizon has reached the Federal Circuit of the U.S. Court of Appeals. The appeal involves a $58 million judgment in Verizon’s favor issued by a lower court last March. That court enjoined Vonage from signing up new customers, a restriction later stayed by the higher court pending the appeal.

Vonage also went public in one of the most unspectacular IPOs of last year, opening at $17 a share and coming to rest at around $3. Vonage’s struggle and SunRocket’s meltdown beg the question of whether or not the standalone, consumer VoIP business model is viable. Its vulnerability is further intensified by the introduction of the Ooma hub, a VoIP box that incurs a one-time charge for indefinite voice service.

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