The art of innovation

Although Vonage had a first-out-of-the-gate advantage in the burgeoning VOIP market, it quickly squandered its lead, Stofega said. "They have not been able to differentiate fast enough, and their innovation fell off," he said.

One of the areas where Vonage lost its potential for success is in the enterprise, Stofega said. "They had good plans in terms of enterprise deployments and new products -- wired and wireless -- but nothing ever happened," he said.

He attributed this to the company's laser-like focus on the consumer market and voice services rather than using voice as a jumping-off point. "They could have attracted the day extender, small office/home office and start-ups, but they stuck too much to their consumer image," he said. He also noted that this rigidity has allowed companies such as Skype Technologies SA, which requires only a small downloadable application, to penetrate the consumer and enterprise markets.

The company was also derailed by the Federal Trade Commission's 2005 inquiry into 911 compliance. That investigation was dropped last month -- but not without taking its toll. "To build out an E911 system is expensive. They did a good job on compliance, but certainly at the cost of innovation," he said.