Vonage’s Hits and Misses

UPDATED: Just at it was gearing up to tout its rapid growth of more than half a million customers, IP telephony player Vonage was hit with a software glitch that knocked out service to half of Vonage subscribers on Friday afternoon.

The outage affected about half of inbound and outbound traffic for
approximately 45 minutes and was caused by a software upgrade installed the
night before, Vonage’s spokeswoman Brooke Schulz said.

The buggy application was patched and service was restored to normal around
3:30 p.m., Schulz said, adding that it was the first software-related error
the 4-year-old company has had.

Vonage CEO Jeffrey A. Citron, who is in San Jose for the Spring 2005 VON
trade show, told internetnews.com that users would get no response
when they called in but “by the second time you tried, most people were able
to get through,”

The privately held, venture-backed Edison, N.J., company said it has
adjusted some of its architecture in terms of how devices time updates to
prevent the problem from reoccurring.

Even so, news of the service problem comes at an inopportune time for
Vonage. Today, the company announced that it now has more than 500,000
lines in service.

The service provider said it is adding 15,000 lines every week, tallying
orders through its Web site as well as retail partners such as Amazon and
Best Buy.

Major telecom and cable providers are rolling out their own VoIP
services for consumers and small businesses; however they
have declined to release subscriber numbers.

None has refuted Vonage’s claim as the market leader, although several
believe that new delivery technology, such as fiber-to-the premises
will help them close the gap rapidly. They have also
questioned Vonage’s call quality.

The subscriber milestone comes on the heels of a regulatory victory as well.
On Thursday, the Federal Communications Commission (FCC) fined a North Carolina telecom
holding company $15,000 for blocking VoIP calls to their customers.

The FCC action came after Vonage and VoIP wholesale provider Nuvio
complained to the agency that broadband providers are blocking or degrading
their Internet telephony services.

While pleased with the fine imposed on one telecom provider, Vonage and
Nuvio said more must be done to ensure the free flow of VoIP traffic.

Michael Singer contributed to this report.