Vonage subsidy is substantial

I was looking through a Circuit City flyer this morning and see that Vonage offers a US$175 subsidy to new subscribers. And that’s not just in equipment subsidies but actually includes a significant cash back component (which could be up to US$135 in cash to top of free equipment). There’s also a free month of service thrown in (US$24.99). Throw in some cash for the reseller and it looks like Vonage is spending $200-250 to acquire each new subscriber. Assuming its profit margin on its service if 50%, it would still take almost 2 years to recoup the acquisition cost. Wow.