Though the news items do not involve the same technology -- one is about VoIP and the other about WiMax -- news items from late last week are related in the sense that they provide clarity on significant issues that have hung over the telecommunications and convergence sectors for a long time.
Vonage, which was perceived to be hanging on by its fingertips due to a trio of patent litigation suits brought by legacy carriers, was said to be talking with AT&T about a five-year $39 million settlement. Last month, the company settled with Sprint Nextel for $80 million and with Verizon for between $80 million and $120 million, said the AP story, which was carried on Yahoo!News. That's a big price tag -- but it's a price tag, not an obit. The story outlines the company's third quarter losses and notes that it did add 78,000 customers, while churn -- the rate at which customers leave -- rose 3 percent.
Clearly, the Vonage is not out of the woods. Expensive settlements, exiting customers and quarterly losses can't be considered good signs. However, at least the settlements suggest that Vonage may survive, or at least make itself a bit more attractive to a potential buyer.
The other news item is the breakup of the nascent partnership between Sprint Nextel and Clearwire. The handwriting was on the wall once Sprint CEO Gary Forsee lost his job, at least partly due to unhappiness on the money being spent on WiMax. Though the interim CEO said that the company still believes in the platform, the move isn't surprising. A Clearwire executive says discussions are being held with other potential partners. Sprint and Clearwire had planned to offer services in areas with an aggregate population of 100 million people.
The most obvious tie between the two stories is that Sprint Nextel is represented in each. The second is that VoIP can be carried over WiMax networks. Indeed, Clearwire already offers VoIP as part of its bundle.
The big picture, however, is simply that two of the dramas -- and investors generally don't like dramas, at least while they are on duty -- are closer to resolution. What is ironic, however, is that in each case the news is opposite of the prevailing trend in the industry segment. For instance, the good news for Vonage -- notwithstanding the fact that it came mixed with dire financials -- doesn't change the fact that the era of standalone VoIP companies is winding down.
Indeed, the story points out that during its time of trouble, Vonage -- once the largest VoIP provider -- has been passed by VoIP providers such as Comcast and Time Warner Cable. The story doesn't say so explicitly, but it is clear that the hot VoIP providers are those that offer voice services as part of a far larger menu of telecommunications services. The economies of scale, it seems, are just too powerful for standalones, who ultimately will be no more than niche players.
Conversely, the bad news for Clearwire and its investors relates to a technology that is still considered to be on an upward trajectory. While Sprint's cold feet can't reasonably be interpreted as anything but a setback, there still is enough support and potential for WiMax as a 4G platform to make this seem like more of bump in the road than a major crisis.