SunRocket Gets a Boost In Crowded Phone Market

S unRocket Inc. , a year-and-a-half-old Internet phone company based in Vienna, certainly has enough big-time competition. Vonage is out there, and so is Skype Technologies.

Today, SunRocket plans to announce some big-time help: It has landed $25 million in venture capital, a noteworthy deal made even sweeter because it's one of the biggest fundings in the region this year and because the round was led by Mayfield , one of the oldest and largest venture firms in Silicon Valley.

SunRocket was founded in early 2004 by Joyce Dorris and Paul Erickson , who had worked together at MCI for more than a decade. That March, the firm landed $9.25 million from BlueRun Ventures of Menlo Park, Calif., and Baltimore-based Anthem Capital Management , and this January recruited another MCI alumnus, Kevin Bennis , to be its chief executive.

The start-up is hoping to set itself apart with a straightforward billing program, charging $199 for a year of online phone service. That allows customers with broadband Internet connections to make unlimited U.S. phone calls through the Web. Most of SunRocket's competitors charge a monthly fee that ranges from about $20 to $35.

Still, making a profit in an emerging, but already crowded, industry won't be easy. Along with established Internet firms getting in the game, traditional phone and cable companies such as Verizon and Comcast are also starting to offer the service.

"My observation is that when there's too much choice out there, people tend not to buy," said Lisa Pierce , an analyst with Forrester Research , who expects there to be a shakeout in the industry.

Today about 1.5 million homes use Internet phone services, but Pierce predicts that number will grow to 12.3 million by 2010. SunRocket's executives won't say how many subscribers the private firm has, just that the number has doubled in the past four months.

The 70-person company will use its new cash to try to increase its brand recognition and is planning to kick off a radio and television ad campaign soon. Whether that will be enough to help SunRocket catch up to Vonage, Skype and the like remains to be seen -- the only certainty in the Internet phone industry is that competition will be fierce.

Updating Governments

The take-away message from COVITS (the Commonwealth of Virginia's Information Technology Symposium ) this year is that state governments still have a lot of work to do in updating old technology systems and that there's no shortage of multimillion-dollar government contracting firms itching to help them do it.

About 1,100 people were registered for the three-day event in Richmond earlier this week, which featured appearances by Gov. Mark R. Warner and Eugene J. Huang , Virginia's secretary of technology. But the bulk of the conference consisted of predictable pitches from companies such as Verizon , Oracle and Sun Microsystems , each of which promised that elusive fix to make government more efficient. (At a price, of course.)

A breath of excitement came Monday night when Tom Ridge , former secretary of the Department of Homeland Security ; Robert M. Gates , former head of the Central Intelligence Agency ; and Suzanne Peck , the District's chief technology officer, gathered to talk about the nation's disaster response programs. The conversation quickly turned to Hurricane Katrina, the need for more cooperation between federal and local governments, and the role technology plays in aiding first responders.

"I hope that in a post-9/11, post-Katrina world, there wouldn't be a mayor in the nation who wouldn't go back to the drawing board and say, 'What have I done in terms of communication systems?' " Ridge said.