VONAGE MUST STOP USING VERIZON PATENTS

A federal judge issued a permanent injunction against Vonage forcing the VoIP phone company to stop using Verizon's patented technology. From The New York Times:

Judge Claude Hilton said an injunction, which followed a jury decision that Vonage had infringed on three Verizon patents, is required because simply providing monetary damages ''does not prevent continued erosion of the client base of the plaintiff.''

Hilton said he will not formally enter the injunction for another two weeks while he considers Vonage's request to stay the injunction. Vonage is requesting a stay of either 120 days or until its appeal is heard.

But Verizon lawyer Dan Webb said any of Vonage's business difficulties should not be a factor in determining a stay. Webb said a stay will cause irreparable damage to Verizon because Vonage will continue to lock up the marketplace of Voice over Internet Protocol, or VoIP.

Vonage stock lost nearly 26% of its value today as investors worried that the company may not be able to continue to provide service without the use of Verizon's technology.

VONAGE VIOLATES VERIZON PATENTS - MUST PAY $58 MILLION FINE

From USA Today:

Internet phone provider Vonage must pay Verizon $58 million in damages for infringing on three of the phone giant's technology patents, a jury ruled on Thursday. The U.S. District Court in Virginia has scheduled a March 23 hearing to determine whether Vonage can continue to use the patented technology — which goes to the heart of how it provides low-cost Internet telephone service to more than 2 million customers. If the court lets Vonage use the technology, then it must pay Verizon 5.5% of total revenue on an ongoing basis, the jury ruled. That could tack an additional $47 million to $50 million onto Vonage's tab this year.

COMPETITION FOR CABLE AND SATELLITE TV?

Before satellite TV, most cable companies enjoyed a monopoly, typically regulated by the municipality in which they operated. As such, cable providers were guaranteed a "reasonable" profit, but without competition, prices climbed steadily over the years.

When satellite TV entered the picture, most believed that the competition would be good for consumers and that increases in prices for cable would slow. That has not been the case. In fact, cable and satellite TV providers have settled into a cozy duopoly, not so much competing as coexisting without much competition.

Prices for cable TV between 1995 and 2005 shot up 93%. In municipalities with only satellite and one cable provider, the average price for cable was $43.34 per month. In municipalities where there was more than one cable provider, the average price was $35.94, demonstrating that the increased competition was good for consumers.

The FCC wants to increase competition nationwide by adopting new rules that would make it easier for phone companies to compete directly with cable TV companies. Verizon already provides TV service in 300 municipalities, while AT&T does so in 24.

The problem in rolling out TV service via phone lines has been the requirement for the phone companies to seek permission and agreements one at a time from local governments. This is time-consuming and inefficient. The U.S. Congress could pass a law eliminating the tedious one-at-a-time agreement requirement, but has failed to do so thus far. Three states - Texas, California, and New Jersey - have passed laws allowing speedy rollout and competition, and their consumers have benefited.

The new FCC proposal would speed things a bit by requiring municipalities to act on applications by phone companies to provide cable TV services within 90 days in most cases, 180 days in the remainder of cases.

As we know, capitalism thrives on competition and the consumer benefits. The sooner new FCC rules or a new law can be passed, the sooner we will all see lower cable and satellite TV bills.

USA Today