A Minute is A Minute is A Minute, Lets Mourn SunRocket

Many have heard me tell the story about my Zayde (yiddish for grandpa) Morris, who upon receiving my first VoIP (Voice over IP) call transmission to him said "sounds like a regular phone call...what's the big deal?"

As someone who back in 1996 founded one of the first commercial VoIP providers (Delta Three, still alive and kicking [NASDAQ:DDDC] although no one remembers me there), it took me time to see past my excitement at new uses of technology to fully understand what my grandfather was telling me -- which is that if you offer the same exact service as existed before, it's just not that interesting, at least to the end user. The "big deal" then may be some back office savings, making the delivery of the "same old" service just a little bit cheaper, which in volume could be a nice business. But exciting it isn't.

Today we mourn the loss of SunRocket, a VoIP service provider that burned through $60 MILLION in venture funding. Yes folks, you heard right, that was $60 million. Just as a comparison, as of the day Delta Three went public, we had spent less than $10 million (and inflation hasn't been that much since 1999). What were the VC funds investing in? I was not sure when I first read of SunRocket's success at raising money, and certainly could not explain today. SunRocket offered no innovation, simply copied the same service a myriad of other companies had out there-- and even worse, came to market as the big guys (Comcast, Verizon, etc) finally started to offer the same package ($25 a month unlimited domestic calling, etc)...except backed by billions of dollars in real value, not (relatively speaking) fly-by-night venture backing. 

At the end of the day, SunRocket was trying to sell the same minute FOR THE SAME PRICE, and that simply will not work, and they did not have any magic to sell that minute any more profitably than the next guy.

Can Vonage be far behind? Well, they have more subs (2 million, versus the 200K SunRocket claimed). That means more cash flow, but as we saw with SunRocket, sometimes companies take a year in advance and then go out of business, leaving customers high and dry. Vonage also HAD more cash, but is burning it rapidly, especially as it fights the patent battles with Verizon (which Verizon will lose, but will take time).

The guru of VoIP, Jeff Pulver, realized sometime ago the newness of cheap minutes was not there anymore, which is why he switched his attention to video.

There are a few companies still trying to peddle cheap minutes on mobile phones as a new thing (VoIP over GPRS or 3G, not a recipe for success). I highly doubt they will be able to beat the mobile network operators at the minutes business -- that's how Amp'd Mobile got into trouble. The newness is not cheap, unless you are so far ahead of the curve, as we were back in 1996, or as Skype did two years ago (by the way, Skype now is stalled, see latest Ebay financial reports...).

A minute is a minute is a minute. Give it a fancy name, it's still a minute. 

Comments

[Moshe Maeir]

There are a few things to learn here. One, not all VCs are smart, even if they have hundreds of millions under management.
Two, there is still much to be done in Voice services, beyond supplying cheap minutes, which is what we are trying to do at our company. I am happy that others see this also.
Jon Arnold - http://blogs.pulver.com/jarnold/archives/2007/07/sun_rocket_refu.html
and The Deal - http://techconfidential.thedealblogs.com/2007/07/angels_back_flat_planet_phone.php
(the numbers mentioned there are off...)

[Ofir Leitner]

I agree that VoIP services are becoming a commodity and that's VoIP via 3G is more than problematic.

However, There's one frontier that is still interesting in VoIP, and that's VoIP calls over WiFi-enabled phones. It can actually create a new balance between operators and other service providers, and in my opinion it poses a huge opportunity.

You can read my post on that subject:
http://www.nextgenmoco.com/2007/07/viva-la-wifi-calls-revolution.html

[Mark]

I'm going with Packet8 from http://voic.com and am really happy. I get my cell phone and high-speed Internet from them already so why not. But I'm still really pissed of at SR! I think those in charge should be investigated.

Mark

[Rohit Patel]

mpingi, a sunrocket rival is offering special offers for exisiting sun rocket customers who can no longer access the sunrocket service because of the company failure. if you are a sunrocket customer, i suggest you check out their offers... check out http://www.1800-info.com/sunrocket/index2.php ive filled the form, waiting for them to get in touch with me...offers seem rather interesting!

[Ivan Swartz]

When SunRocket went down, I went browsing to see which VoIP company can provide the best transition deals to the previous SunRocket customers. Finally, I noticed the promotional offers of Lingo for SunRocket customers located at http://www.lingo.com/shop/promotions/sunrocket.jsp. They have good plans for SunRocket customers. Moreover, they have a good coverage over US and 22 countries across the world. Above the all, anyone can avail of its annual international calling plan just for $195.

I thought Lingo could be a better option for ex-SunRocket customers. Their important calling plans have good promo offers such as one month free, free shipping, free second phone line, free office assistant, free activation, free equipment and 30 day money back guarantee.

[billy mathew]

I was a former SunRocket customer but now switched to Lingo owing to its poor quality of service. At present, Lingo is very good alternative VOIP service for SunRocket customers to switch on. Even its $14.95 economical Small Talk calling plan gives you the best value for your money. This plan is fully packed with great features such as 500 day and night calling minutes to make calls to US, Canada, and Puerto Rico, free unlimited calling to other in-network lingo subscribers, local number portability, online account management plus all the advanced and basic features.