The Call 20 - 11/8/2004
From Michael Robertson, CEO and founder,
SIPphone.com
SIPphone Files Lawsuit Against Vonage For False Advertising
A few weeks ago I wrote you about what I considered to be a disturbing tactic by Vonage to lure customers. They are selling an Internet Phone Adapter online and in retail stores without being honest about the real costs and functionality of the device. Vonage branded products are proliferating at stores at artificially low prices (sometimes as low as $9.95) designed to undercut competitors and deceive customers. What is often not disclosed on the packaging, nor in the retailer's catalogs or web pages is that these SIP adapters will not function unless you pay hundreds of dollars per year to Vonage. As a result, SIPphone this week filed a false advertising suit against Vonage on behalf of consumers requesting the court to issue an immediate injunction to stop their misleading and false advertising.
I first heard about this from our customers who purchased units intending to use them with their SIPphone account. They were surprised to discover after buying the unit that they were required paid Vonage a service fee that runs hundreds of dollars a year, many times the cost of the unit itself to make it function. On the box, Vonage claims boldly "No monthly contracts" when, in fact, a recurring monthly fee is required otherwise the device is a doorstop. What is not known to buyers is that Vonage is secretly paying the manufacturer to cripple the device so it will only work with Vonage. The problem is none of this imperative information is disclosed on the box or in the advertisements. Consumers should be told the facts so they can make informed decisions to go with an unrestricted device that can be used with a free internet phone service or a device tied to Vonage requiring hefty fees.
Imagine if you bought a great priced TV, took it home and discovered it only worked if you paid $25 a month to a satellite operator in New Jersey. You couldn't choose to use an antenna to get free channels, hook it up to your DVD player, PlayStation or use your favorite satellite or local cable service because the manufacturer had crippled the device so it would only work with a NJ satellite company. That's the situation we are confronted with. There is no other device sold in the networking aisle in your local computer store that is locked to one ISP and is completely useless without a big annual fee. For example, there are no routers or modems at CompUSA that require you to pay only AOL just to view a webpage. We should not allow this costly and deceptive tactic to begin with new SIP devices like the Vonage Linksys Internet Phone Adapter.
Many companies are selling SIP phone adapters which have no monthly or annual fees to make internet based calls. We have sold thousands of adapters at SIPphone.com. Buyers of these devices can choose to use any service they wish and out of the box the unit can send and receive net calls with no additional fees. In their desperation for customers, Vonage is masquerading their fee based service as simply a piece of hardware and hiding the fact that it will not function unless the consumer pays more money. They are employing these tactics at a growing number of stores (both offline and online) and it's possible other Vonage-like competitors like AT&T's CallVantage may be forced to copy these underhanded tricks to compete. Crippled hardware is a nasty trick by phone companies that leads to customer lock-in and higher prices. If you can only use Vonage, you are forced to pay whatever rates they wish to charge.
In our case we are asking the court to require Vonage to prominently label all hardware sold in retail outlets with the following information:
- This unit has been initially set to the Vonage phone service and will not function without additional ongoing payments.
- A minimum of $180 per year is required for the basic service level
- This unit has been intentionally restricted to only work with Vonage and will not work with any other SIP-based service today or in the future
Beyond stopping the deceiving packaging and advertisements, we will ask the court to to correct the damage and confusion already caused by Vonage in the market place. We believe Vonage should attempt to notify all existing buyers of their hardware units and offer a full refund if they claim to have been unaware of the crippled hardware or the requirement for monthly fees.
The world is migrating to VOIP calling over the next decade and my hope is that we take full advantage of this opportunity to build an improved telecommunication system around the open standard SIP. I want it to be a world where consumers are able to choose any equipment with any service rather then have the service dictated by the type of phone they have or the region they live in. I want consumers to have all the information up front so they can choose the best option for them. This requires truthfulness in advertising and that's what we're asking for in this lawsuit. It's a crucial early battle for open standards and honesty in the nascent VOIP industry.
To see images of the Vonage Internet Phone adapter box, visit our site on the case, SIPphone legal
Let us know your thoughts and feedback about this or any other SIP topic in our user forum.
**Michael Robertson
CEO and Founder
SIPphone.com
