• USA Today, Wednesday, October 4, 2006 11:30 AM

Jeffrey Citron, chairman of Vonage, the voice over IP provider that is famous for its disastrous initial public offering earlier this year, defended the Internet phone company's ill-fated IPO and dismissed claims that competition from cable and phone companies will cut into its business. "We (cable companies and Vonage) can both grow nicely at the same time," said Citron. Vonage is one of the original voice over IP providers; it uses a regular phone and an adapter to send calls over a broadband connection. It has about 2 million lines. Since it went public at $17 a share, Vonage's stock price has fallen more than 58 percent. That makes it the second-worst IPO of the year, according to Renaissance Capital, which says the stock was clearly dominated by short-term investors who wanted to get out early--although none made any money doing so, because the price hasn't returned to that level since. Citron defended his company by saying that demand for IPO shares exceeded supply by five to one, and that customer-service problems had been addressed, subscriber turnover had lessened, and the company's net loss had fallen 14 percent to 74 million. Nevertheless, Vonage is set to maintain its aggressive marketing program, budgeting $360 million to spend on ads. Cable companies, which provide rival VoIP services, typically offer phone service for around $40 per month. Vonage is priced at $25 per month.

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