Regulation, Bad Timing Killed SunRocket, Former Employee Says
Almost 200 SunRocket employees found themselves jobless when the VoIP company shut down with only a short internal memo for explanation. And the company’s more than 200,000 customers received no notice beyond a curt message on SunRocket’s customer service line: “We are no longer taking customer service or sales calls. Goodbye.” Unfavorable regulatory decisions, the unfortunate timing of Vonage developments and an exodus of talent after the departure of SunRocket’s founders contributed to the VoIP company’s demise, said Brian Lustig, who was SunRocket’s media relations director from 2004 until April 2007. SunRocket did not return requests for comment.
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The shutdown Monday came about two weeks after the Washington Post reported SunRocket had laid off 30 employees. SunRocket Chief Marketing Officer Chris Mannella told the paper those layoffs were made to reduce expenses. He also said SunRocket was “looking at a number of financing alternatives and considering a variety of different structures.”
SunRocket’s internal memo leaked first onto a GigaOm blog post by site founder Om Malik on Monday. Sonya Jefferson, SunRocket’s director of routing and carrier services, sent employees an e-mail Monday morning: “We have just been informed that any and all last ditch efforts to keep operations running as well as a potential sale of the company have not gone through and that SunRocket will cease operations at [close of business] today. As such, today is my last day and everyone else you may have worked with at SunRocket.” Malik said he had not confirmed the e-mail’s authenticity, but Lustig said Jefferson worked for SunRocket and the memo looked “on the up and up.”
In reply to Malik’s blog, a poster who identified himself as a laid off SunRocket employee said most of the staff had no idea the ax was falling. The lack of explanation is not unusual for the company, another employee said in a reply to Lustig’s Friday blog post, written when the closing was still a rumor.
SunRocket did not fall victim to an over-competitive VoIP market, as some published reports have indicated, Lustig said in an interview. “It’s oversimplistic to say the cable bundle killed the independent VoIP provider,” he said. “There’s a very big consumer pie out there, and SunRocket could have commanded a hearty slice.” The problem had more to do with Vonage and regulatory developments, he said. Vonage developments twice interfered with SunRocket’s attempts to raise money, Lustig said. First, Vonage went public while SunRocket was still raising its last two rounds of financing, he said. Later, Vonage’s patent litigation with Verizon cast a “cloud of uncertainty” over the entire VoIP market, he said.
The FCC’s decision to require VoIP companies to contribute to the Universal Service Fund also hurt SunRocket’s business, Lustig said. The decision forced SunRocket to raise its prices, he said.
The February departure of founders Joyce Dorris and Paul Ericksod hurt company morale, Lustig said. “A lot of folks were impacted” and a “significant loss of talent and expertise followed,” he said. Dorris and Ericksod’s departure was part of the reason Lustig left, he said.
Palo Alto consulting firm Sherwood Partners will close out current and outstanding invoices, it said Tuesday. Sherwood said it expects to enter into agreements with other service providers and move customers to those companies. SunRocket customers will be notified by e-mail when an agreement is reached, it said. Creditors will receive notice within 30 days about assignment and filing of claims in SunRocket’s liquidation, it said.
Rival VoIP companies are looking to pick up SunRocket’s customers. Vonage will offer two months of free service to SunRocket customers who transfer their numbers, it said. Nuvio Corporation will offer a “Safe Landing” rate plan of $199.99 per year, the same annual rate SunRocket offered, it said. InPhonex will waive its number porting fee for SunRocket customers and let them trade in their phone for a free phone adaptor, it said. ViaTalk will offer contract buyouts for SunRocket and other rival VoIP subscriptions, and offer free ground shipping on ViaTalk’s phone system, CEO Brendan Brader said. Porting numbers to other companies should not be difficult, said a blog post by “Jaydub,” a management level systems architect who worked for SunRocket. Porting is a pull process, and “there need not be anyone alive on the other end to release the number,” he said. In addition, the numbers are probably not owned by SunRocket, he said. “SunRocket never bothered going through the registration to get its own numbers,” he said, “so proof of number ownership lies with the upstream number providers.”
SunRocket’s Web site Tuesday was still promoting a limited time “3 Months Free” offer.