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Internet Remolds Phone Service

Vonage In Print News

Internet Remolds Phone Service

December 6, 2003

By David Ho

NEW YORK -- When friends and family dial Tom Tribolet's Phoenix number, the phone rings at his home in Argentina.

It's not simple call forwarding but a rapidly emerging technology that allows this retired veterinarian to make or receive calls with his local phone number anywhere he has high-speed Internet access.

"When I pick up the phone here in Buenos Aires, I have a live phone in the United States," said Tribolet, 64, who now trains racehorses. "This is a wonderful way to be able to keep in touch with my two sons and their families and my other friends."

Analysts say the technology, called Voip or Voice over Internet Protocol, will upset the dominance of traditional phone companies and could revolutionize communications, signaling an end to calls over the copper wires people have used for more than a century.

The service is bought from a company that provides customers with a phone adapter that links ordinary phones and fax machines to the cords from a cable or DSL Internet connection.

With this future looming, regulators and telephone and cable companies are scrambling to be part of it.

"Voice over IP is going to be as important and have as much impact as the telephone itself," said Jeff Kagan, an independent telecommunications analyst based in Atlanta. "It's one of those disruptive technologies that's going to change everything in the business."

The incursion of Internet calling into the telecommunication industry has so far been small, with about 130,000 home phone subscribers. In comparison, there are about 166 million residential phone numbers in the United States and an additional 150 million cellphone numbers.

However, the number of Internet phone users is expected to jump next year as more companies offer the service.

The technology converts speech into packets of digital information that speed over the Internet and are reassembled into a voice on the other end. Many companies offering the service promise an experience no different from making a traditional phone call.

A leader in this nascent industry is Vonage Holdings Corp., a private company based in Edison, N.J. Vonage began offering its Internet phone service a year ago and has grown this year from 7,500 customers to more than 76,000.

One of those thousands is Tribolet, who pays $34.99 for unlimited calling in the United States and Canada and a host of features ranging from traditional call waiting to voice-mail messages delivered to his e-mail.

How it works

Vonage and similar Internet services can call traditional residential phones, using part of the existing phone networks. Calls between people using the Internet on both sides might skip the traditional phone system entirely.

Vonage customers can transfer their existing phone numbers or have their choice of local area codes for a new number.

About a quarter of subscribers choose local numbers that don't match their geographic area, said John Rego, Vonage's chief financial officer. He said this uprooting of local numbers is going global, with the company expanding its operations into the United Kingdom and Switzerland.

"If you're living in Manhattan, you could have a U.K. phone number," he said. "Phone numbers don't mean the same to us in our world."

The technology, which enjoys cheaper rates and freedom from the regulations that apply to phone companies, is yet another challenge for the regional Bells -- BellSouth Corp., SBC Communications, Verizon Communications and Qwest Communications. The industry giants already duel with cable companies over broadband subscribers and struggle to adapt to more people "cutting the cord" and leaving land-line phones for cellular service.

Enter the Bells

Sensing that the best way to beat the coming threat is to join in, the Bells are rolling out their own Internet calling services. Most of them, as well as AT&T Corp., already provide some type of Internet phone service for business customers.

Qwest and Verizon say they want to have widely available Internet calling services for consumers next year.

Kagan, the analyst, said that while companies like Vonage are growing rapidly, they don't threaten phone companies in the long term.

"I don't think they are going to be the leaders," he said. "They're the ones who are forcing the change."

Instead, he said, cable companies are the greatest challengers to the communications industry, and "if we go out a few years the cable companies and the phone companies start to look a lot alike to the customer ... because of voice over IP."

That convergence has already begun.

Cablevision, serving more than 3 million subscribers in and around New York City, began marketing an online calling service last month to its more than 1 million high-speed Internet customers.

Time Warner Cable, with about 11 million customers in 27 states, launched an Internet phone service in Portland, Maine, in May and now has more than 8,000 customers there, said spokesman Keith Cocozza. Four out of five of those customers transferred their traditional residential phone numbers to the new service.

The company has also begun offering the service in Raleigh and plans to expand to all the states where it has cable service.

This story also appeared in:
  • Atlanta Journal Constitution, December 6, 2003

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