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TEXXR

Chronicles

The story behind the story

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The SunRocket Is Down For The Count

The Sun Rocket it seems, has hit the deck.  We had reported earlier that things were getting pretty tenuous at the VoIP services company.  The Vienna, VA.-based company stopped taking new orders recently.  —  The company is said to have had massive layoffs and basically is down for the count.

GigaOM Om Malik

Context & Ripple Effects

The endgame at SunRocket played out fast: GigaOM flagged rumored layoffs at the Vienna, VA VoIP provider on June 29, and by July 3 The Washington Post confirmed it had dropped a fourth of its staff. Now the company has stopped taking new orders altogether, with reports of further mass cuts leaving it effectively finished.

It is the second consumer-facing VoIP casualty of 2007 covered here, after Tello's shutdown in March — a sign that the early wave of independent internet-phone startups is running out of runway.

First-order effects

  • Existing SunRocket subscribers face an abrupt loss of service and the hassle of moving their phone numbers to another provider, with the company no longer accepting new customers or signaling a path forward.
  • The rumored additional layoffs, on top of the confirmed one-quarter staff cut earlier in July, leave the company without the operational capacity to keep its service running.

Second-order effects

  • Rival consumer VoIP providers get an opening to absorb displaced SunRocket customers, and number-porting support becomes the competitive front line in the scramble for them.
  • Discount VoIP plans sold on prepaid annual terms come under scrutiny from buyers burned by a mid-contract collapse, pressuring remaining providers on how they bill and hold customer funds.

Third-order effects

  • If the pattern holds — Tello gone in March, SunRocket down by July — independent consumer VoIP consolidates around a handful of survivors while voice migrates toward bundles sold by better-capitalized carriers and cable operators.
  • Regulators and consumer advocates gain a test case for what protections, if any, apply when a phone provider folds with prepaid balances and active numbers stranded.

The trend: 2007 is shaping up as the consumer VoIP shakeout year, where thinly capitalized standalone internet-phone startups give way to voice as a feature inside larger carriers' bundles.