Vonage Holdings Corp. (NYSE: VG) has escaped the hangman's noose for now, settling a patent dispute with Sprint Nextel Corp. (NYSE: S) for $80 million that threatened to sink the company. Shares of the Internet phone service provider surged on the announcement.

Hold the applause for a second.

Remember, the Holmdel, NJ company recently was ordered to pay $58 million with Verizon Communications Inc. (NYSE: VZ) to settle another paent dispute. Though the company say it can "work around" the disputed patents, it has other serious problems.

The company is locked in a competitive struggle against much bigger competitors such as Verizon and Comcast Corp. (NASDAQ: CMCSA) that over time it will lose even as more telephone service migrates to the Internet. Yes, I know Vonage has a cadre of customers who are just crazy about it and even liked those annoying commercials that thankfully have disappeared but I don't see how the company will survive over the long term.

Even if Vonage Holdings Corp. (NYSE:VG) can resolve its patent issues with Verizon Communications Inc. (NYSE: VZ) -- and that's a huge if -- , the pioneering Internet phone service provider is still doomed.

As I've argued before, Vonage is in a commodity business where people decide what to buy based solely on price. I just don't see how the Holmdel, New Jersey-based company will be able to compete against much larger rivals including Verizon and Comcast Corp. (NASDAQ: CMCSA).

Plus, the company continues to spend bucket loads of money. Selling, general and administrative expenses soared 72 percent in the first quarter compared with a year earlier and 11 percent from the fourth quarter in part because of the Verizon litigation. SG&A represented 46 percent of revenue in the quarter, up from 44 percent last year, and 45 percent in the fourth quarter.

Customer churn, long a problem for Vonage, rose in the 2.4 percent from 2.3 percent in the last quarter. Earlier this week, Vonage named Jamie Haenggi, who joined the company last year from ADT, as chief marketing officer where she will be responsible for "spearheading a more unified marketing approach at Vonage in line with the company's announced strategy of improving its competitive position in the marketplace," according to a press release.

Ultimately, the court will decide whether CEO Jeffrey Citron's claims that the company has found a way to work around the Verizon patent is correct. His opinion, which helped push Vonage's shares up yesterday and today, isn't the one that matters.

Vonage Holdings Corp. (NYSE: VG) Chief Executive Michael Snyder has resigned and was replaced by founder and chairman Jeffrey A. Citron. The company also announced it was slashing jobs and marketing costs. Plus, it announced pretty dismal preliminary earnings.

Let the Vonage deathwatch begin.

Snyder came to the company because Citron's past run-ins with the SEC made some investors uneasy. Vonage mentions that Citron will only have the job on "a short-term basis" while it searches for a replacement. Masochists are welcome to apply.

Vonage also is freezing hiring and plans to reduce its workforce by 10%. In addition, the company also will slash SG&A expenses, which no doubt includes advertising. Maybe those annoying Vonage commercials will Finlay go away.

The company reported a churn rate of about 2.4 percent. If Verizon Communications Inc. (NYSE: VZ) can prevent Vonage from signing up new customers as part of its patent infringement case, the Holmdel, NJ company is doomed because it can't sign up new customers fast enough to replace the ones that quit. During the quarter, there were 332,000 gross subscriber line additions and 166,000 on a net basis. Revenue was $195 million while the market ting costs per gross subscriber line addition was $275.

Judging from my past Vonage posts, I know the company has plenty of loyal customers. I believe in VoiP too. That's why I signed up for Comcast Corp.'s (NASDAQ: CMCSA) service. That technology is here to stay even if Vonage may not be.