Unsure of the Concept

Aren't Vonage customers "switchers"?
Willing to leave established telco's for better prices.
How loyal are they?
What is the "Lock In"?

If I'm "Big Telco" wouldn't I want to try to compete on price and keep customers via some other bundling/tie-in's?
Cingular got me with "rollover" and coverage at both houses.

NYTimes:
Vonage Moves to Reassure Nervous Investors

By KEN BELSON and MATT RICHTEL
Published: May 31, 2006

Vonage, tarred by a disastrous initial public offering last week, is scrambling to reassure investors. The company, which provides Internet phone service, said yesterday that it would reimburse the bankers who handled the sale if any Vonage customers refused to pay for shares that were allotted to them.

Vonage gave its customers a chance to buy as much as 15 percent of the 31.25 million shares that were offered last week. About 10,000 of the company's 1.6 million customers ultimately received shares, which were sold at $17 each, according to a person briefed on the deal. Customers had until yesterday to open an account with a specified broker and pay for their shares.

Some customers who participated in the "directed share program" were reluctant to pay for their shares after the stock fell. The shares have lost more than 26 percent of their value since their debut last Wednesday. They fell 52 cents, to $12.50 yesterday.

Update (aka Whoops)
Might sue customers (really smart move ;-p)

Vonage May Seek Payment From Balking Share Buyers

By MATT RICHTEL
Published: June 1, 2006

SAN FRANCISCO, May 31 — Vonage, the Internet telephone provider, said on Wednesday that it might seek reimbursement from customers who fail to pay for shares they committed to buy during the company's disappointing initial public offering last week.

Wednesday's statement continues Vonage's public relations and financial struggle since it went public last week. Its shares have dropped almost 29 percent from their $17 opening price, closing on Wednesday at $12.02

Maybe it's just a nefarious plot by "Big Telco's" to discredit net-phones.
"Do you REALLY want somebody like this running your phone service?"

Addendum :
A bit more digging and it all starts to come back to me
Jeffery Citron "banned from securities trading":

Internet telephony | Vonage unwanted | Economist.com

"In 2003 Jeffrey Citron, a former broker, paid $22.5m in penalties to settle allegations of fraud and agreed never to work in the securities industry again. He then turned his attention to his next big thing—making phone calls over the internet. He launched Vonage, a company in New Jersey that has since become almost synonymous in America with the term VOIP (for “voice over internet protocol”). Spending oodles on marketing, Mr Citron has persuaded 1.6m Americans to ditch their land-line telephone company. In the American VOIP industry—which has 5.5m subscribers now, but should have 24m by 2010, according to TeleGeography, a research firm—Vonage is the leader.

That did not count for much on May 24th, when Vonage made the worst stockmarket debut by an American technology firm in two years, offering new shares worth $531m in total, which dropped 13% by day's end. There had been signs of desperation in the preceding weeks—such as a plea to customers to take up 13.5% of the new shares—but a belly flop of these proportions was surprising. Is VOIP over-hyped?"


Economist goes on to note that Skype is software only (headset reccomended).

Link to SEC on settlement: SEC Charges Former Day-Trading Principals with Securities Fraud; Others Charged with Fraud or Violating Recordkeeping and Reporting Rules; Press Release 2003-5