Vonage proves its worth after Hurricane Katrina

Vonage, a voice-over internet protocol phone service provider, takes a leadership position in its market by showcasing the technology's value - even in the face of Hurricane Katrina.

Vonage, a voice-over internet protocol phone service provider, takes a leadership position in its market by showcasing the technology's value - even in the face of Hurricane Katrina.

It wound up taking a natural disaster to help rescue Vonage from a PR nightmare. Back in May, the Federal Communications Commission listened to the horror stories of customers who couldn't get through to 911 emergency services because they only subscribed to internet-connected, or voice-over internet protocol (VoIP), phone connections. Regulators heard from the likes of Cheryl Waller, a Florida woman whose infant daughter stopped breathing and died because Waller says she couldn't reach emergency assistance using her Vonage connection.

For privately held Vonage Holdings Corp., the country's largest provider of VoIP service, these accounts were a tough pill to swallow. In only four years, thanks to an aggressive advertising campaign and communications effort, Vonage had successfully marketed VoIP as a viable alternative to traditional phone service.

"A few years ago, it was unknown whether this would truly replace phone service," says Brooke Schulz, SVP of corporate communications for the Edison, NJ-based firm. "It has become a real viable industry now."

Working toward change

Vonage and its 10-person communications team spent much of the earlier part of this year defending VoIP's viability. VoIP subscribers use a regular touch-tone telephone, but calls transmit over internet-based lines instead of the more expensive route: traditional analog. That's why, until recently, VoIP didn't provide 911 emergency service.

"The 911 service was built in the '70s, is not modernized, and has been designed to handle traditional landlines," says Schulz.

Compounding the problem, says Schulz, is that 911 service is controlled nationwide by local telephone companies, including BellSouth and Verizon, that are not eager to help what is essentially a competitor. "We'd been banging our heads against the wall on this issue," says Schulz.

To help communicate its position to regulators and politicians, Vonage added Stephen Seitz as VP of 911 regulatory affairs to its small Washington, DC, office. Seitz is the former director of government affairs at the National Emergency Number Association.

Then Hurricane Katrina devastated New Orleans. One of the only ways the ravaged city could communicate with the outside world was through VoIP connections. The Wall Street Journal and The Washington Post published stories explaining how Vonage had provided crucial communication lines, including between President George W. Bush and New Orleans Mayor Ray Nagin. Through its "Vonations" charitable program, Vonage donated $4,000 worth of product to Baton Rouge General Hospital after its traditional long-distance phone service failed.

"Unfortunately, it took a tragedy to wake up the federal government to this issue," says Schulz of the lack of 911 service for VoIP. "We are finally at a place where we now have contracts in place to gain access to 911 service."

Vonage already has enhanced 911 service in New York City, for example. The positive press also has resulted in Senate Commerce Committee members promoting a bill that, among other things, would protect emergency responders from lawsuits arising from
911 calls from VoIP providers. The bill would also attempt to modernize the 911 service.

With the 911 controversy behind it - or at least having subsided - Schulz's team is now refocusing on its so far successful formula of building the Vonage brand, which means continuing to educate consumers what the technology could mean to them from a practical point of view. This formula helped Vonage become the first VoIP provider to reach a million customers, which it did in September. But the market has a ton of room for growth.

Schulz says communications early on focused on the cheaper cost versus traditional phones. "It was education-focused," says Schulz, and initially targeted communication analysts and blogs operated by techie-types. Vonage is shifting its messaging. "Now that people understand the cost benefit and how the technology works, it is very much about its features."

To encourage journalists to discover the features for themselves - and how clear the connection sounds - Vonage sends out 15 to 20 demos weekly. When chairman and CEO Jeffrey Citron hired Schulz in May 2002 to build the communications department, she says, he told her "he wanted to keep communications isolated from marketing to give us the freedom to be very reactive to any breaking news." Schulz previously worked in the New York office of Weber Shandwick, where her accounts included traditional telephone companies.

The PR team often sits in on engineering meetings, for example, enabling them to talk to journalists about new developments, such as VoIP portable wi-fi Vonage handsets. "This also allows us to get product in as many hands as possible and get it there without having to sacrifice the advertising budget," adds Schulz.

Mitchell Slepian, Vonage's manager of media relations, says this is a key strategy because trial is the only way journalists can experience how the technology can benefit them - and consumers. Small-business owners can track phone expenses using VoIP's online account manager, for example. Or parents in, say, New York can more affordably keep in touch with their college kids by getting them a "virtual phone number," which allows them to make calls with a New York area code, even if their children attend school in, say, Boston.

Engaging media

While the communications angle has shifted, the approach to media has not, says Todd Barrish, director of Connors Communications in New York, which has worked with Vonage even before its service launched. (Vonage has since hired Nike Communications for product placement PR, and just recently MS&L, also based in New York, for an influencer campaign.)

To position itself as a category leader, Vonage issues a steady stream of press releases announcing every "milestone," like it did in September, when Vonage reached the million-customer mark. "We are constantly building the Vonage story," says Barrish. "People now call Vonage a pioneer in this space, and they wonder what it is going to do next."

But Vonage runs the risk of "creating the category for the cable and telco companies to then come in and ride off their coattails," says Maribel Lopez, VP and a research analyst at Boston-based Forrester Research. She's talking about cable giants like AOL Time Warner and Cablevision and, on the telephone side, AT&T and Verizon, nipping at the high-end of the market; at the cheaper end, there are smaller independents, such as Lingo and SunRocket. "It is becoming a relatively crowded market," says Lopez.

Cable and telephone companies can bundle their VoIP service with broadband, television, regular phone service, even wireless. For them, VoIP is a retention play: It doesn't want customers to cancel their more expensive traditional phone service, so they market VoIP as an additional, back-up line. After all, they point out, internet connections can be spotty, whereas traditional service rarely, except in extreme cases like hurricanes, goes down.

In some ways, Lopez says, Vonage is in danger of suffering from the "great job it has done of creating the category." She suggests that Vonage "partner with smaller regional cable companies who have not built their own VoIP services." It is still early enough in the game, says Lopez, for Vonage to broaden its service offerings.

Schulz admits that the increasing number of competitors "is a difficult challenge for us. In the case of AT&T, for example, it has been around for hundreds of years." But Vonage is hoping that by continuing to lead the market in what VoIP can do for the average consumer, it will be able to sign up more customers than its larger rivals.

"We have to go from an early majority to a mass-market product," says Schulz. "The challenge is making it palpable to a mass-market audience who hasn't thought about this new technology and doesn't see the difference between VoIP and traditional phone service." At least the issue of providing emergency service is no longer such a roadblock in helping Vonage's communications team conquer that challenge.

PR contacts

SVP, corporate communications and regulatory affairs
Brooke Schulz

Director of corporate communications
Jamie Serino

Connors Communications, Nike Communications, MS&L, Mind Over Media

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