The Daily T1R Predicts Gloom and Doom for SunRocket

<p>In his subscription only Daily T1R, Daniel Berringer postulates that SunRocket may have their lights turned out soon. It seems the reports I've been hearing around the Valley are that their CEO has been on the "money trail" around Silicon Valley, but not getting any takers.

In my view companies like Vonage, SunRocket and Packet8 have all spent way too much in to acquire subscribers and the Venture Capitalists are starting to take a hard look at pouring good money after bad. While Sun Rocket has an amazing new product development team out here in San Diego with a team of two or three ex Qualcomm types, the sacking of the founders, the loss of their PR person and the strained relationships with other companies in the eco-system are not unknown. The other problem appears to be traction, a problem that will only get worse unless the VoIP players start taking looks at niche marketing, not the online version of mass marketing (banner ads, newsletters, and SEO.) These have been the stock and trade marketing tactics, along with PR efforts that the VoIP players have undertaken.

It only works to a point. The cable operators have won that battle, largely by applying research that Level3 turned out after VP, Wholesale Marketing, Cynthia Carpenter undertook a real study of what consumers wanted and then made it her personal mission to educate the cable operators on what it would take. Surprisingly other Level3 customers had access to the same data, but it seems the MSO's were the ones who took it to heart.

From what I learned this week when visiting Level3, their voice traffic is bigger in the last two quarters than it has been up to that point in their entire life through October 2006. That's massive ramp in anyone's book and why the VCs have a good reason to take a hard look at not investing in SunRocket too quickly. Compare this to Earthlink whose new Line Powered Voice service is starting to gain momentum. The ADSL2+ platform is just getting rolled out and that means good things for Earthlink as the phone service is basically a hosted and Central Office based offering. Consumers get super fast ADSL without any need to fiddle with a telephone adapter.

The other challenge that has to have the VC's concerned about SunRocket is the rollout of FIOS by Verizon. While I'm somewhat skeptical of UVERSE, I'm more intrigued by FIOS but unfortunately I'm not in their service area. FIOS speeds are much higher, and more in line with what is being offered by the next gen players like Wave and SureWest. Having experienced SureWest in Sacramento I'm realizing just how pokey cable modems are.

My prescription for companies like SunRocket, Packet8 and Vonage is roll up. There is a business opportunity for them all, but not with so many players out there. If they have any Intellectual Property that has value then in a rollup, there's hope.