SunRockets demise

SunRocket, providers of VOIP services recently announced their bankruptcy. Thousands of SunRocket’s subscribers were left in a lurch with no telephone service. Today, the telephone is a basic service essential for customers: individual subscribers, small business owners or college students. This spectrum of subscribers in most cases draw their livelihood using a telephone. These cost-sensitive subscribers get easily wooed to low-cost VOIP services provided by “startup” providers. But how do subscribers protect themselves in situations like these? SunRocket had no transition plan for their customers and all they were left with was with a notice on their website. On account of the subscribers, the following should be addressed.

• FCC not having a policy to protect subscribers in cases like these
• VC firms backing up companies providing essential services should be held responsible. Mayfield Ventures which backed SunRocket has conveniently sidelined itself! Lack of business planning was one of the major reasons for their demise
• There should be minimum capital with the company at all times to accommodate these situations
• There should be clear directives to these companies to transition subscribers to another provider in case of a failure

Do you want your essential services managed and operated by a “startup”? I am not sure. Imagine you entrust your electricity services or your heart pacemaker in the hands of a “startup”? Would you do that?

That raises the other important question. Does this mean we are at the disposal of the big traditional cable and telephone companies? With the plethora of consolidations happening in the market place, I feel we do. This is a classic example of how difficult it is to be a pure-play VOIP provider in a quad-play world. It’s going to be a tough business for providers like these and these companies need to get some tips from “Swim with the sharks without being eaten alive” to stay afloat and be profitable.