All Things Digital

Vonage’s slow death is … well, it’s slowing.The financially struggling Internet-phone company reported today a smaller first-quarter loss thanks largely to prudent cost cuts.

Great news for Vonage (VG), which has been tormented by a barrage of costly legal battles and set upon by new and powerful rivals. The company’s net loss shrank to $8.96 million, or 6 cents a share, from a loss of $72.3 million, or 47 cents, in the year-earlier quarter.

Sadly for Vonage, the company’s Q1 loss isn’t the only thing that shrank. Subscriber growth did as well. The company signed up just 30,000 new subscribers in the quarter, a big decline from a year earlier when it added nearly 166,000 subscribers. Worse, turnover rate increased to 3.3% from 3% in the fourth quarter.

Still, Vonage is a bit healthier than it’s been for some time now. So while it may not exactly be on the road to recovery, it’s at least crawling in its general direction. To that end, the company’s inked a deal to resell Covad’s DSL service under the Vonage Broadband name. An interesting idea, in that it will allow Vonage to bundle a broadband offering with its Internet telephony services like most other phone and cable companies on the planet. But DSL? Really? At a time when Verizon (VZ) is expanding its FiOS fiber-optic service and Comcast (CMCSA) is boosting the speed of its high-tier cable broadband?

The economy may be slowing, the traditional wireline phone business deterioriating, but Verizon (VZ), as director Michael Bay says in one of the company’s new commercials (see below), is doing “awesome.”

The company’s first-quarter earnings met Wall Street expectations today thanks to strong growth in its wireless and FIOS home fiber-optic services businesses. With a 10% increase in first-quarter profit, and revenues that rose 5.5% to $23.83 billion, Verizon’s business would appear to be more recession-proof than others. “We’re really not seeing a change in trends,” Chief Financial Officer Doreen Toben said in an interview. “How many people are really going to drop their wireless phone?”

Not very many. Verizon added 1.5 million subscribers to its mobile business during the quarter. That said, there are plenty of folks willing to drop their landlines. Verizon wire-line subscribers declined 8.2% to 40.52 million from 44.15 million in the first quarter of 2007.

Verizon’s Advanced Web Search service was, in the words of the company, “designed to help you quickly find the destination Web site you were seeking.” But apparently that’s true only if the destination site you’re seeking happens to be Verizon’s own search-engine page.

Some subscribers to the company’s FiOS fiber-optic Internet service are finding themselves redirected to Verizon’s own advertising-laden search-engine page when they mistype a URL or query a nonexistent Internet site–even if Verizon’s search isn’t set as their default. Verizon says it’s only trying to help, and to be fair, it does offer subscribers–who never “opted in” in the first place– the chance to opt out by changing the DNS settings in their routers.

Still, it’s all a bit too reminiscent of VeriSign’s Site Finder, a service that hijacked people who misspelled domain names and sent them to a Web directory full of advertising. Which, given the hue and cry over Net neutrality, isn’t the sort of memory you want to be conjuring up as a major telecom provider.