Vonage's High-Spending, Low-Return Ways Make It Ideal For The MVNO Market
from the misguided-strategy dept
Things have been a little bit quiet on the Vonage front since the company's shambolic IPO last year, but it's been more of the same: slowing growth and poor financial performance. Apparently, though, the company has a new plan -- BusinessWeek swears that Vonage is going to become an MVNO and start selling wireless service. The article says that with such a move, "Vonage might have a better shot at profitability." But that's really not clear at all, since the virtual operator market has been one largely characterized by heavy losses and high customer-acquisition costs, with very few hits to balance all the misses. The article further surmises that Vonage needs to get into selling multi-service bundles to survive and succeed, but this, too, doesn't make a lot of sense. It's rather unlikely that Vonage will be able to undercut the cable operators that are beating it at VoIP by reselling their broadband and TV services under its own brand. It already offers one commodity product, VoIP, where it really only competes on price, so trying to bundle together a few others and take on some formidable rivals (like cable and telephone operators), again, competing just on price, doesn't seem like the wisest idea. The company says it will introduce new products like dual-mode cellular-WiFi handsets, but again, all these really aim to do is offer cheap calls -- and that's a strategy that isn't currently working for Vonage, and one that isn't sustainable once its rivals also drop their rates and remove any differentiation.