Why Vonage's road ahead will be tougher than they say

Today, Vonage CFO John Rego makes a couple of claims I would like to dispute.

Rego says that the company's subscriber acquisition costs, now at about $200 per sub (for marketing and all that) are going down.

He also claims that as more incumbent broadband providers roll out VoIP offerings, the explanations of VoIP they will offer to the marketplace will help all VoIP providers in a strong enough position (i.e., Vonage, with $200 million in freshly minted VC funds) to capitalize on the fact that many more potential customers will be familiar with VoIP.

In other words, what Rego is counting on is a scenario where the ILECs and cable giants act as disciples for VoIP, and Vonage gets their share of believers.

That scenario is not entirely implausible, but I would offer a couple of counterarguments:

Vonage's subscriber acquisition costs may go down, but not appreciably. As I said earlier today, as the concept of VoIP becomes more widely understood, the established name power players will have a leg up. They are going to be extremely aggressive bundled service competitors, and the familiarity they evoke from years of experience with less technically sophisticated consumers will give them an advantage over pure play VoIP providers that - despite ads everywhere you look - are not that widely known.

So, once the big boys turn the mass advertising on high gain, Vonage will have to pedal harder to stand out.  And, pedaling harder does not sound like a ready recipe for automatic subscriber acquisition economies.

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