Digital disconnect

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One independent Internet phone provider that knows it must evolve or die is 8x8 Inc., the Santa Clara, Calif., company behind the Packet8 phone service.

It is the No. 2 stand-alone provider since SunRocket’s demise. The company has about 185,000 residential and business customers, including about 19,000 SunRocket refugees.

Seeing Vonage’s failed IPO and the strength of the cable companies, 8x8 chose to focus on small business customers instead of the volatile residential market, CEO Bryan Martin said.

He said cable firms often bypass small businesses, which tend to use phone company Internet connections.

The company 8x8 said in its quarterly earnings report Thursday that it was the “first major pure play VoIP service provider to generate positive cash from operating activities.”

The company said more than 8,000 U.S. businesses have subscribed to its phone service, representing 44 percent of its revenue.

“We see it as a nice defensive niche against the cable companies in particular and to the extent Vonage ever decides to play in this space,” Mr. Martin said.

Mr. Martin said Vonage’s model has been to pour money into growing at any cost and SunRocket was a “carbon copy of Vonage” with offers that made little sense. He said 8x8 rebuffed a SunRocket request for an alliance as its end approached.

SunRocket is not unique, and I think over the next couple of months you’re going to see a couple of other players exit the space, hopefully in a more controlled fashion in regard to their customers,” Mr. Martin said. “We believe we could be one of the last players standing.”

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