The Internet Is Calling

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The phone companies' quick response to Citron's frontal assault "is a sign that they are worried about losing customers," says John Hodulik, a telecom analyst at UBS. There's a risk of cannibalizing their existing business, but it's one they have to take. Cable companies, on the other hand, can go after an entirely new market, connecting Web phone service to existing broadband customers.

Where does that leave Vonage? It could go the way of Netscape and Hotmail, both of which were swallowed up after blazing the trail for larger, less agile competitors. Citron isn't ready to sell just yet. There are about 26 million homes and small businesses in the U.S. with broadband, and Vonage needs to capture only a fraction to build a sizable business. In the meantime, Citron and his investors are laying the groundwork for an IPO. Citron declines to speculate on his or his company's future, but he's certain he has made his mark. "No matter what happens with Vonage, the world will forever be changed because of what we've done," he says. Or your phone bill will be changed, at the very least.