SunRocket Leaves Thousands without Phone Service - Packet8 Picks Up

SunRocket Goes Down

SunRocket, one of the nation’s largest internet-phone (VoIP) providers, closed its doors a couple of weeks ago without notifying over 200,000 subscribers, leaving them without service or reimbursement. The company initially recorded a message on their customer service line saying, “We are no longer taking customer service or sales calls. Goodbye.”

SunRocket lured in thousands of subscribers by offering unlimited calls for an upfront fee of $199 for the entire year. Those who took up the offer paid upfront and have since lost phone service although their pre-paid year hadn’t yet expired.

History of SunRocket

Just a couple of weeks ago, SunRocket announced major plans to cut costs by $140 million, including $110 million in marketing expenses in order to become more competitive. There was no sign of imminent collapse.

Founded in 2004, SunRocket was backed by several Silicon Valley venture capital firms including Doll Capital Management, the Mayfield Fund and Blue Run Ventures. It was founded by Joyce Dorris and Paul Erickson who left the company earlier this year.

Companies like SunRocket who were offering calls over the Web were seen as huge rivals to established phone carriers when they started showing up a few years ago. While the phone carriers have been worrying, many VoIP companies were having a difficult time competing against their more financially stable rivals who offer alternative services as part of packages that may include broadband Internet, a landline, TV or cell phone services.

Left in the Dark

After several days without service or explanation, Packet8 has since been chosen as the preferred VoIP service provider by SunRocket. Meantime, SunRocket will begin communicating with its current subscribers via email and voicemail, urging them to transition their service to Packet8 immediately.

The terms of the agreement state that Packet8 will waive all regular start up costs with its residential service plans and offer one free month of service. SunRocket subscribers will be able to choose from several plans, including one costing $199 for unlimited calls for one year. There was no mention of honoring any fees paid to SunRocket.

The Appeal of Cable and Telephone Companies

It seems that independent VoIP providers are facing escalating competition from cable television and telephone companies such as Verizon. The VoIP service providers, including Vonage, have been having a bad year as cable companies have begun rolling out their stand alone digital phone services along with bundled utility packages in the market.

Vonage has been in a patent battle with Verizon and is struggling to retain customers who fear service disruptions due the battle. Vonage has also reported wide losses since it held its official public offering in May of 2006.