Facing an uncertain future for its VoIP service, Vonage today announced it is restructuring to cut costs and will trim both its staff and its marketing efforts. At the same time, the company announced that CEO Michael Snyder is stepping down from that position and from the Vonage Board of Directors, but did not provide further explanation.

Vonage Founder and former CEO Jeffrey Citron will serve as interim CEO while the company seeks Snyder’s replacement.

Vonage said it will cut its marketing efforts by about $110 million to about $310 million in 2007 and will lower general and administrative costs by $30 million. That action will include job cuts, although the company didn’t say how many jobs it would eliminate.

Vonage is embroiled in a patent conflict with Verizon and faces an April 26 court date, at which time it could be ordered to stop signing up new customers for its VoIP service. A federal jury ruled in March that Vonage violated patents held by Verizon and ordered the company to pay $58 million in damages as well as licensing going forward. A judge later said Vonage could continue to serve its current customers but couldn’t sign up any new ones. The VoIP provider got a temporary stay of that ruling while it prepares its appeal.

But the patent trouble isn’t even Vonage’s biggest problem, says Forrester Research analyst Sally Cohen. Pure-play VoIP providers such as Vonage are getting squeezed out of the residential market by cable companies and are losing out as well to mobile phones, she said. Consumers now have so many alternatives, including voice over Instant Messaging services from Google, Yahoo!, AOL and Microsoft, that the VoIP niche is being carved up into many pieces, Cohen said.

“Vonage had the largest subscriber numbers for pure-play provider -- 2.2 million last year, but that’s just a drop in the bucket of the larger voice market,” she said. “They had to work hard before all this patent stuff came up. Consumers don’t want new telephone technology. They want their phone to look and feel and sound like it always has. That is where cable is pulling away from VoIP pure-play providers – they install a line that looks and feels and sounds like phones always have. The phone jack still plugs into the wall. VoIP pure play was not that way. You have to buy the piece of equipment that allows your phone to plug into your broadband connection. Consumers had to make that leap on their own, and they didn’t want to do that.”

Where consumers are looking for alternatives to a landline phone, they are more likely to turn to mobile phones than to VoIP pure-play phones, Cohen added. “I think that we see mobile phones in 75% of U.S. households right now,” she said. “That is where the future lies.”

One reason the judge’s order halting sales to new customers would hit Vonage hard is that the company loses about 600,000 customers a year and must constantly replace them to keep its revenues up.

“Churn is high,” Cohen said. “Consumers try this, and it doesn’t sound how they want it to sound or they aren’t satisfied that it doesn’t work when the power goes out.”

Increasingly, she added, the voice market looks a little like the Internet content market in the sense that there are a larger number of niches – almost like long-tail content – that attract a smaller number of people.

“I think there will always be a niche consumer market, you are not going to get a better deal on long distance, especially international long distance than from pure-play VoIP company,” Cohen said. “Their rates are always going to be best. Someone who is calling internationally a lot even someone calling long distance a lot may still want a pure-play.”

Pure-play VoIP providers, which includes companies such as SunRocket and 8X8, also are targeting small businesses, where they will find a bigger and more interested target audience, she added.