Consumers and small businesses sign up for VoIP services in hopes of saving money and taking advantage of advanced features such as e-mail delivery of voice mail messages that they can’t get with their landlines. Some keep their PSTN service for fax compatibility, security systems, or emergency calling backups, but many have cut the telco cord altogether and are using VoIP as their primary telephone service, often supplemented by cell phones.

But now some VoIP users are getting nervous, wondering if they’ll wake up one morning to find themselves without phone service. When we opened VoIP accounts, few of us considered that our providers might go out of business with no warning. But that’s exactly what happened earlier this month to about 200,000 SunRocket’s customers.

The shutdown may not have come as a surprise to those who keep up with the industry. Apparently the three-year-old company has had financial problems for a while and was sinking fast. Prior to the shutdown, they laid off most of their employees. But most VoIP customers don’t keep up with what’s going on in the industry, and it certainly came as a surprise to them when one day they just didn’t have a dial tone.

Even worse, those who prepaid for a year’s service are apparently out of luck when it comes to getting a refund of their money, although they may be able to get discounts on service if they sign up with certain other providers. Many customers signed up for the prepaid plan for $199 per year, because the monthly cost came to only $16.58, significantly lower than most unlimited calling monthly VoIP plans.

Sunrocket’s web site now carries a “critical announcement” stating that services may be discontinued at any time and all services will be discontinued no later than August 5, 2007. The announcement also states that two “preferred providers” have agreed to give special pricing to SunRocket customers to help them migrate their service – but fails to mention which providers those are.

Competitors to the rescue

As soon as the news was out, competing VoIP providers rushed in, offering to take up the slack and sign up SunRocket’s old customers. The most popular VoIP companies have all announced special offers or initiated efforts to attract former SunRocket users:

  • Teleblend: One of the “preferred providers,” Teleblend is offering a discounted rate of $12.95 per month for SunRocket customers with prepaid annual contracts.
  • Packet8: The other “preferred provider” is offering SunRocket customers no startup cost and one month of free service. They specifically state that they cannot honor any prepaid amounts paid to SunRocket and that SunRocket equipment doesn’t work with Packet8 service.
  • Lingo: Though not a designated “preferred provider,” Lingo (Primus) is offering free equipment, shipping and activation along with one month of free service to SunRocket subscribers. To get the special deal, you have to send a copy of your current SunRocket invoice.
  • Vonage: Vonage is offering two free months of service along with a free phone adapter, waiver of the activation fee and free shipping for SunRocket customers.
  • ViaTalk: ViaTalk has a contract buyout offer that gives a service credit for up to three months of free service for prepaid contracts from any other carrier, including SunRocket – if you sign up for their own $199/year plan.
  • VoIPYourLife: VoIPYourLife is offering free hardware, free virtual numbers and expedited porting of your existing phone number.
  • Earthlink trueVoice: Earthlink is offering a discounted price of $19.95 per month for unlimited calling for six months to former SunRocket customers, increasing to the regular price of $24.95 per month thereafter.
  • Nuvio: Nuvio is allowing SunRocket customers to sign up for the monthly plan and roll over to the yearly plan if satisfied with the service, with no cancellation fees.
  • BroadVoice: BroadVoice advertises a special steamlined process to facilitate the migration from SunRocket.

How to lose friends and alienate people

Many of SunRocket’s former customers are angry not so much that the company failed, but at the way they were treated during that failure. Customers weren’t notified in advance that their service would be shut off, so they weren’t able to make new arrangements in time to avoid a disruption in phone service. The customer service center was shut down and those who called it got a recording that said “we are no longer taking customer service or sales calls.”

Losing your phone service is a major annoyance for anyone. For those who are dependent on it for their businesses or due to medical or health situations that may necessitate communication, it could cost money or even a life.

Choosing a replacement

If your VoIP provider goes bankrupt, you’re likely to think very carefully before choosing a replacement, and you may wonder whether to choose another VoIP company at all, or go back to PSTN.

The SunRocket shutdown is making VoIP users (and potential users) think again about whether the technology is stable and reliable enough for their needs. Other carriers are obviously aware of this, as many of them are now emphasizing that issue on their web sites. For instance, BroadVoice stresses that it has been offering stability since 2003. Lingo notes that it is backed by Primus, one of the largest telecom companies with over $1 billion in annual revenues. Vonage boasts “over 2.4 million customers strong and growing.”

But just how much do those claims mean? SunRocket was the second independent VoIP provider, after Vonage. Vonage itself is still mired in a patent lawsuit brought by Verizon, who claims they own the patent for the way Vonage connects VoIP calls to the PSTN system. Vonage has admitted that if Verizon wins and they’re prohibited from using the technology, they could go out of business. Would other VoIP providers follow?  Will Verizon end up with a VoIP monopoly? Nobody seems to be sure right now, but even if you weren’t a SunRocket customer, their demise just might affect your decisions on VoIP service in the future.

Deb Shinder is a technology consultant, trainer, and writer who has authored a number of books on computer operating systems, networking, and security. She currently specializes in security issues and Microsoft products, and she has received Microsoft’s Most Valuable Professional (MVP) status in Windows Server Security.

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