Citron: Triple Play Is Tripe

Vonage CEO Jeffrey Citron sees no immediate threat from telcos and cable companies offering consumer VOIP

March 8, 2005

4 Min Read
Citron: Triple Play Is Tripe

SAN JOSE, Calif. -- Voice Over the Net Conference -- Vonage Holdings Corp. CEO Jeffrey Citron has no love for the Triple Play of voice, video, and data, saying that phone and cable companies are using it as little more than a marketing device.

"We don’t believe in the triple play and we never have,” Citron says. "We think bundling makes sense, but bundling has to be natural, and it also has to provide a cost advantage."

Many would say Citron is the central figure in the movement toward a VOIP paradigm, but he’s no starry-eyed visionary -- he is clearly not interested in discussing new services that don’t make immediate financial sense.

In an interview with Light Reading here at the VON conference, Citron showed supreme confidence that Vonage's business model is the right one for VOIP -- and that the moves by larger incumbents into the VOIP world are largely just symbolic.

More importantly, Citron seems to have one basic premise: Vonage is cheaper, and that's what folks want.

Citron certainly doesn't lack confidence in his views. He often punctuates the end of his assertions with an emphatic “right?" -- almost demanding that you agree with him.

"We don’t charge a premium just for putting things together; we should be putting them at a discount for doing so," Citron says.“If it’s more expensive, then what good is the bundle, right?

"Sure, the phone companies do discount the services from their normal rate card, but is it actually that much cheaper? And if you look at it, if you are getting broadband and cable TV from a cable operator, and then you go add Vonage voice service to that existing double play, Vonage would be cheaper for you."

As for IPTV from incumbents, Citron is equally skeptical. He points to BellSouth Corp.'s(NYSE: BLS) recent offer of IPTV services to its 3 million customers, of which only 200,000 have so far taken advantage.

“It’s interesting: Is video really an important part of the communications bundle?” He questions the fundamental notion that consumers will find value in such a combination. To illustrate further, he pulls out his oft-told tale about the kerosene oil delivery service that decides to deliver bottled water as well. (To summarize: It was a Bad Idea.)

“So the triple play hasn’t affected us, for the most part,” Citron says. “Frankly I look at bundles as really a tool to market and a tool to retain, but I don’t know if anyone’s really demonstrated that it is an effective tool to sell.”

Citron says that he has yet to see a service that requires the presence of voice, video, and data delivered through one pipe that exploited all three media in an interesting or valuable way. To this end, he says his company will begin working video telephony into its product later this year, and it is currently working on offering Vonage service over cell phones.

In the end, Citron believes that the major telcos will be focusing on wireless services and on squeezing the last bit of margin from their wireline services before they ever get really serious about moving their customers over to VOIP services.

On the technology front, Citron said the Vonage network is made up largely of homemade software along with Juniper Networks Inc. (Nasdaq: JNPR) and Cisco Systems Inc. (Nasdaq: CSCO) switches and routers. Very early in the company’s history, Cisco made an adapter for it that allows a normal telephone to be plugged into a PC for making VOIP calls.

Vonage is still a privately held company -- perhaps one of the most high-profile private companies in existence today. Speculation on a possible IPO has been swirling for some months now among analysts and media, but Citron won’t talk about his company’s future financing plans.

Citron said his company has raised a cumulative $208 million, in two rounds of funding. Vonage now has over half a million users, he claims, and is adding over 15,000 users per week.


— Mark Sullivan, Reporter, Light Reading

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