Wednesday, July 18, 2007

SunRocket leaves customers behind

By MATTHEW BARAKAT Associated Press

VIENNA, VA. — The abrupt shutdown of Internet phone carrier SunRocket left more than 200,000 customers scrambling for alternate service Tuesday and raised questions about the viability of other stand-alone Internet phone providers.

SunRocket, like other companies that only provide phone service over broadband, attracted customers with cheap plans and innovative features. But traditional phone and cable companies also lowered prices and started bundling their services.

The competition proved too much for the No. 2 standalone Internet phone company after Vonage Holdings Corp.

SunRocket ceased operations without warning on Monday.

Nobody at SunRocket was available to explain its quick exit. SunRocket Chief Executive Lisa Hook did not return a call seeking comment Tuesday.

At the company's Tysons Corner, Va., headquarters, the phones went unanswered, the doors were locked and a cardboard sign with "Out of Business" scribbled on it hung inside the glass front door. The lights were on, and computers and fax machines remained in place, but all the artwork was gone from the walls.

Customers are out of luck. Many paid for their service well in advance, drawn by aggressively marketed service plans that cost $199 a year. It was not clear whether SunRocket customers have any recourse with government regulators.

Meanwhile, a California company that is overseeing SunRocket's liquidation, Sherwood Partners, said it is in talks with other service providers to take over portions of SunRocket's customer base. Sherwood spokesman Martin Pichison said he hoped to have such deals in place by today. He acknowledged that SunRocket customers are cutting their own deals with other companies.
Many of SunRocket's customers will opt for Vonage or another VoIP provider, some of which are posting "Welcome SunRocket" offers on their Web sites, said Stephan Beckert, research director at TeleGeography, a Washington-based research firm.

"It will give them second thoughts about prepaying a year in advance," Beckert said. The leading standalone provider, Vonage, has more than 2 million customers but it also has faced slowing growth rates and financial losses. It suffered a legal setback earlier this year when it lost a patent infringement case to Verizon Communications and a judge issued an injunction barring it from signing up new customers.

The case is on appeal and the injunction has been stayed, but Vonage has warned in court papers that its viability is precarious if the initial verdict and sanctions are allowed to stand.