VoIP woes: Losing service without warning

VoIP is heralded as a new age of free-market competition in the telecom industry, but it is still not without significant drawbacks

On Monday evening, my wife reached me on my mobile phone. She was spending a long weekend with her family in Maine.

"I've called our home phone several times," she said. "And I keep getting a busy signal."

That night, I didn't think twice about the phone problem. We have been VoIP customers for more than a year, and flaky service has been standard operating procedure. I reset my VoIP converter box and crossed my fingers.

Then, on Tuesday, when the problems persisted, I called my VoIP provider, SunRocket, and got the message that the company was no longer taking tech support and sales calls. That's not good.

Many free-market analysts and large telecom providers have hailed this as a new era of competition. It's a wonderful new world where your VoIP provider can cut off your home phone service without warning.

This week, SunRocket went belly up without any communication to its 200,000 customers. SunRocket had been providing both my home and my home office phone service.

I could charitably say that phone service since Monday evening has been intermittent. In reality, phone service has been mostly dead with occasional spurts of dial tone.

Now, when business associates try to call my home office, they get either a busy signal, or they get one ring and a hang-up. I'm trying to switch my home and office numbers to Vonage, but they say it could take up to 10 days for the switch to happen.

When I first heard about SunRocket more than a year ago, it seemed like a good solution to large monthly telephone bills. The local incumbent phone service was charging about $60 a month for unlimited local and long distance.

SunRocket offered unlimited local and long distance and even some international calling for $199 a year. The company also offered a second out-of-area-code phone number at no cost. That feature caught my eye because my home office is in suburban Maryland, but most of the people who call me are located in Washington, D.C.

My wife and I looked at a savings of more than $500 a year and decided it was time to check out VoIP.

The switch was not without problems. Voice quality was spotty at best, particularly when we were talking to someone on a mobile phone. For months, we had problems with frequently dropped calls.

We soon became quite familiar with the "not-my-fault" phenomenon. SunRocket blamed the problems on Comcast, our broadband provider. Comcast, of course, blamed SunRocket. (Comcast: We can't guarantee quality of service for third-party applications. By the way, why don't you switch to our voice over IP service -- it only costs double what you're paying now.)

After months of experimenting with equipment configuration, we finally got most of the problems ironed out. When it came time to renew our annual subscription, we had mixed feelings, but SunRocket was still significantly cheaper that most alternatives.

We paid $199 for a year of service in March. In late June, in a sign of things to come, SunRocket laid off about a quarter of its workforce. The way I look at it, someone owes us about nine months of phone service, but we're not holding our breath.

Now, in some ways, this is just a story about a couple hundred thousand VoIP customers who saw their phone service go dead without warning. But there's a larger context here.

During the last couple of years, some telecom analysts, free-market think tanks, and telecom carriers have trumpeted a new era of competition.

Their argument: Old, monopoly-style regulations aren't needed any more because there's all kinds of competition out there. They say that telecom carriers shouldn't have to share their networks with competitors and broadband providers shouldn't be prohibited from blocking or slowing Web content from competitors because there's all kinds of competition out there.

Meanwhile, SunRocket, the second largest independent VoIP provider, has shut down. Vonage, the largest independent VoIP provider, has faced a patent infringement lawsuit from giant competitor Verizon, and its future is uncertain. Verizon contends it owns the patent to the technology that translates VoIP calls and allows them to connect to traditional telephone networks.

Wireless phone carriers provide some competition, but the largest two wireless carriers are owned by the two giant telecom carriers. I'm not sure that counts as competition.

In the broadband space, there are some indications that one or two new competitors are on the way, but it could take years. Right now, well over 90 percent of the U.S. has at most two broadband providers, the cable company or the telecom carrier. The telecom carriers are fighting against auction rules that would encourage a new broadband provider when a chunk of television spectrum is freed up in early 2009.

Elsewhere, broadband customers in other countries, such as Japan and South Korea, pay less for faster service. Japanese customers pay about one-seventh what U.S. customers do per megabit of bandwidth. But few people in D.C. want to talk about the real reasons for this. It's not free-market competition; instead, telecom services in many other countries are highly regulated and subsidized by the government.

For some of us, the promise of telecom competition seems a long way off.

And, by the way, if you want to find me during the next week, your best bet is probably e-mail.