Why SunRocket's new pay-by-the-year calling plans will fizzle off the launching pad

This morning, Internet telephony provider SunRocket introduced a flat-fee, $299-a-year calling plan to 41 localities around the world.

SunRocket SunSpots Edition will include much of Europe, China, Japan, South Korea and Argentina, as well as key cities in Latin America such as Mexico City, São Paulo, and Caracas. SunSpots also offers unlimited free calling throughout the U.S., Canada and Puerto Rico. 

SunSpots Edition also delivers unlimited free calling throughout the U.S., Canada and Puerto Rico.

For $50 more, SunRocket Global Edition will offer calling to India, the Dominican Republic and the Phillipines, as well as an allowance of $20 per month toward international calling anywhere in the world.

Here's my take:

By getting their money up front, SunRocket is banking the cash now, rather than risk reduced income via customer churn. I am not sure this is going to work, though.

Given SunRocket is trying to compete on price with offerings that let you pay in $10 increments (Skype), $24.99 a month (such as Vonage), or even SunRocket's own monthly plan ($24.95 a month) how many prospective customers who are attracted to VoIP because it will save them a few bucks a month are all of a sudden going to shell out $299 or $349?

There's a built-in contradiction between competing on price and then hoping penny-counting prospective customers will shell out a lot, up front. This pricing strategy doesn't work in home appliances, so why would it work in telephony services?

I have to tell you, if you are on a budget- the type of budget for which VoIP calling to family and friends back home is a heaven-sent penny-saver- maybe you just don't have $299 or $349 right now. Maybe pay-as-you go - by the minute or even by the month- is a powerful incentive for you.

Update: Just got SunRocket's take on this from Brian Lustig, their director of media relations. First, Brian points out that if you leave the annual plan before the expiration date, you'll get a pro-rated refund for the unused months. I don't think this eases the burden some economy-conscious prospective SunRocket customers might  feel about having to shell out a year's payment in advance.

But for their part, SunRocket feels differently. Here's Brian's take: 

On the pain point for consumers when it comes to paying an annual fee, that is of course an important discussion. What is that pain point? In other words, the reason that annual phone service never really existed as a pricing option for several decades is that up until recently, it would have meant shelling out $700 at one time, and no one would have done that. We believe that $200 - $350 is a reasonable amount for folks to write a check for at one sitting, it is how folks pay for insurance and items like that so the ground has been softened in that sense as long as the price tag is feasible for the average consumer.
But there is a pain point that we are acutely aware of in terms of how much people are willing to pay in one annual check. Our feedback has always been that most folks would much rather write a single check and forget about it for 12 months rather than sift through those absurd fees and charges every month that they realize by now simply fatten the phone companies’ bottom line.

Well, readers, you have read what I think, and now you know SunRocket's position. So post a Comment and let me know which one of us you think is right. Or if we both have a point.