For Verizon and Vonage, VoIP Battle Personal

It's hardly a surprise that Verizon(VZ) is trying to kill Vonage(VG).

Voice-over-Internet protocol, which should really be called "telephone freedom," is the biggest threat the major phone companies have faced. The breakup of AT&T (T) and the advent of wireless don't even come close.

For phone companies, Verizon's victory in last month's patent trial was a great start. It has left Vonage, the most prominent VoIP provider, in crisis and reeling from judgment to judgment.

For the folks running this campaign, the battle is deeply personal.

Residential and small-business fixed-line telephony accounted for 44% of Verizon's sales last year.

Verizon's executives and directors hold 21.3 million shares and options among them, including 6.5 million for Chief Executive Ivan Seidenberg. His stake includes 4.6 million options that are worthless if the stock stays below $35, and only start to gain value in tranches above that.

Prior to last month's court victory, Verizon was down to $35.30. Since then, it's jumped nearly $3. Nice work in short order.

You can expect VoIP and phone freedom to become a political issue. It's worth noting that Verizon and AT&T are two of the most connected companies where it counts -- in Washington, D.C. Between them, they gave $5 million to political campaigns in the 2005-06 campaign season alone.

All of which may make Vonage look pretty heavily outgunned. The VoIP company already was reeling from wounds, many of them self-inflicted, before last month's devastating court defeat. Right now, it's living from court judgment to court judgment. It is pinning its hopes on an appeal on April 24.