Internet Phone Upstart at a Crossroads: Off the Hook, or Off the Mark? - New York Times

"A chief concern is that Vonage, which helped popularize Internet telephone calling, faces brutal competitive pressure from well-heeled and bigger telecommunications players. That makes it expensive for Vonage to acquire customers and, in turn, to make them profitable. Internet calling allows voice traffic to be sent as packets of data, using the infrastructure of the Internet rather than expensive phone networks.
Competitors, particularly cable companies, continue to erode Vonage’s market share. After the first quarter, Vonage had 29.7 percent of the market for Internet phone service. That’s down from 31 percent at the end of 2005 and 34 percent at the end of 2004, according to research by Sanford C. Bernstein & Company."