On the eve of its much-anticipated IPO, trouble is brewing for broadband phone provider, Vonage. As it takes this desperate measure to raise capital, the company’s service is being undercut by competitors all along the boards.

The most notable competitive on Vonage’s service is Skype’s recent announcement that they will offer free PC-to-Phone calls within Canada and the U.S. at zero cost to the customer. This, coupled with AOL’s offer of a free VoIP phone number with its AIM instant messaging service, is enough to turn computers into free telephones for all calling within North America.

For those who prefer to use traditional telephones for their VoIP calls, Verizon has recently lowered the cost of its VoiceWing broadband phone service to just $24.95/month, which is roughly the same cost as Vonage’s service, however Verizon’s doesn’t have a connection fee.

New York-based Cablevision, meanwhile, has just launched a new international digital phone service that offers 500 minutes of anytime worldwide calling for just $19.95/month.

Offerings like this are slowly but surely making it harder for Vonage, the VoIP market’s early leader, to recruit new customers, despite its extensive marketing efforts.

Like the company itself, the Vonage stock price will probably surge at the time of its launch, but be unable to handle its own undue growth. In the end, most of the IPO’s proceeds will be pumped into the rapidly growing internet advertising industry, meaning that Google and Yahoo shareholders will likely gain much more from this than anyone buying Vonage stock.