Vonage subscriber-growth slowdown is troubling

If I were Vonage, I'd be very concerned about one particular trendline contained in the company's fourth quarter financial report, released yesterday.

Only 166,000 new subscribers were added in 4Q 2006, compared to what one analyst- John Hodulik of UBS Investment Research- had previously predicted as a 235,000 gain.

Vonage itself had experienced 205,000 new subs inb the third quarter.

While Vonage ended 2006 with more than 2.2 million subscribers, the declining fourth quarter numbers tell me that Vonage is having trouble making the transition from a service for the technolgically curious (early adopters) to the mainstream. VoIP services sold by mainstream customer's current Internet service providers, as well as IM-rooted services such as Skype, are taking hold, but new Vonage sign-ups seem to be slowing down.

This is even more ominous when you consider the customary healthy Holiday season foot traffic in stores where Vonage equipment is not only sold- but prominently highlighted. Why didn't more folks buy Vonage gear and then rush home to set it up?

"We remain concerned about the growth in the business in the face of increased competition" from cable TV companies selling phone service," Hodulik wrote in a research advistory to his clients.

Investors aren't too happy either. Yesterday,after the fiscals were released, Vonage stock dropped to an all-time low of $5.30 a share. That's nearly 10 percent from Wednesday's $5.84 a share, and less than 1/3 the February 23, 2006 IPO price.

I'll say it again: Vonage needs to either build, or append themselves, to a triple-play service offering. Best to find another service that is young and hungry. How about Cricket Wireless for cell and then maybe Wayport for Wi-Fi?