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BT Gives Credibility To Calls Over Internet

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BT Gives Credibility To Calls Over Internet

December 9, 2003

By Chris Oakes

Bringing a powerful consumer name to an obscure technology, BT Group of Britain on Tuesday said it would market a service that transmits phone calls over the same Internet lanes traveled by e-mail, digital music and Web pages.

The BT announcement follows by a day a similar move by another big brand, Time Warner Cable in the United States, both of which lend a new legitimacy to the once newfangled idea of so-called voice-over-Internet protocol, analysts say.

BT's new service lets customers plug their telephone into their high-speed Internet connection to take on a second, less expensive phone line. The move made BT the first incumbent phone company in Europe or the United States to launch a significant broadband voice service beyond quiet, unpromoted trial services.

Time Warner Cable announced on Monday a partnership with Sprint and MCI that connects Internet-based calls carried via Time Warner's broadband cable service to MCI's and Sprint's traditional telephone networks. (Page 14.) Another U.S. cable giant, Cablevision, in September added a flat rate $34.95-a-month voice service option to customers of the company's high-speed Internet service.

Called Broadband Voice, BT's new £7.50-a-month service would save customers up to 57 percent on calls to mobile phones and up to 25 percent on daytime calls made in Britain, BT said. Calls on evenings and weekends within Britain can be made at no charge for up to an hour.

"VoIP is a technology that can help reduce prices of certain basic services," said Fergus Crockett, managing director at BT Consumer. "The play that we have today is an additional way to make calls very cheaply if you're a cable or broadband customer."

Until the past year, voice-over-Internet protocol has been confined to "early adopter" customers who typically had to configure their computer to place Internet calls.

More recently, services such as Vonage in the United States have enabled regular telephones to connect to customers' high-speed Internet service using a special adapter box, the same format used in the new BT service.

Cable and phone companies have run subdued trial services while only talking about plans to eventually make a major push into Internet telephony. But until now, the only large-market push into Voip was confined to Japan, where broadband access provider Yahoo BB, signed up two million broadband voice customers in under a year.

Vonage has offered a service that links a regular telephone to a customers' high-speed Internet service using a special adapter box. A residential plans sells for $34.99 a month and allows unlimited calling in the United States and Canada.

BT's plan is to attract voice customers who may have been lured by voice services offered by the cable companies NTL and Telewest.

"The cable companies have been waiting to do this," said Sam Paltridge, a telecommunications industry analyst at the Organization for Economic Cooperation and Development. "They've certainly talked about it and said they were going to do it, but in the last month or so, perhaps prodded by the Vonage story, we started seeing the mainstream companies start to do it."

"It's really a formidable push," said BT's Crockett of the company's new service. "It's something we would expect to interest the vast majority of our customers."

To Voip advocates, adding voice to the Internet's digital traffic enables not only a cheaper global phone network but more flexible services as voice becomes just one more component in the flow of data. One example is sending voice along with video images to create Internet-based video telephony. Portability is also potentially enhanced, as broadband voice customers may take their phone adapter on the road.

Plugging it into any broadband connection - Ethernet or Wi-Fi connections in hotels, schools, or cafes - they can make and receive calls via the same number and service they use at home. This capability is part of the Vonage service, as well as BT's new Broadband Voice.

The market for Voip is still small. The British telecommunications research firm Ovum says the Voip market had fewer than 200,000 users worldwide, with less than 20,000 in Europe.

But the latest moves give Voip a firmer footing among mainstream providers and is likely to produce new believers and competitors, Ovum said.

Jeffrey Citron, chief executive of Vonage, said his company had converted 10,000 to 20,000 customers a month for the past year to build its small base of 80,000 customers. "Obviously, the transition has started, but it's not going to happen overnight" he said.

Because BT is the first incumbent telephone company to make its own move into VoIP, it is especially interesting, Paltridge said. The incumbent likely saw the voice market as inevitably moving to Voip and wanted to make sure it was the one offering consumers the alternative, he said.

If they don't do it, then someone else like a Vonage will come along and use other people's broadband connections to do it, Paltridge said

In fact, Vonage is planning to use an infusion of new capital to take its service to international markets next year. Citron said that while its plans were not solidified, the company will make Voip accounts available in some European countries, including Britain and Switzerland

I think you're seeing the beginning of the transformation of the voice communications networks of the world, Ovum called BT's service a startlingly proactive jump into mass-market voice-over-Internet protocol.

It presents an opportunity to take telephony share from the cable operators, while testing the water for future Voip deployments, all with a very low risk of cannibalization, according to a report Tuesday by analysts Jan Dawson and Mark Main.

The Ovum analysis did point out some potential drawbacks for BT. The foray into Voip is not without risks, however. BT is relying on the cable operators not to shut off the service, but they are likely to be livid that BT plans to use their broadband lines and bandwidth to undercut their prices.

Brand damage could also come from the fact that broadband voice will not offer the same quality as BT normally offers, nor the ability to call 999, premium rate numbers or most international destinations, it said.

We've been saying this for a year - that voice over Internet telephony is about to mainstream, and this is the first time we've seen a major move by major names,Main said.

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†AK and HI residents pay $29.95 shipping. ††Limited time offer. Valid for residents of the United States (&DC), 18 years or older, who open new accounts. Offer good while supplies last and only on new account activations. One kit per account/household. Offer cannot be combined with any other discounts, promotions or plans and is not applicable to past purchases. Good while supplies last. Allow up to 2 weeks for shipping. Other restrictions may apply.

1Unlimited calling and other services for all residential plans are based on normal residential, personal, non-commercial use. A combination of factors is used to determine abnormal use, including but not limited to: the number of unique numbers called, calls forwarded, minutes used and other factors. Subject to our Reasonable Use Policy and Terms of Service.

2Shipping and activation fees waived with 1-year agreement. An Early Termination Fee (with periodic pro-rated reductions) applies if service is terminated before the end of the first 12 months. Additional restrictions may apply. See Terms of Service for details.

HIGH SPEED INTERNET REQUIRED. †VALID FOR NEW LINES ONLY. RATES EXCLUDE INTERNET SERVICE, SURCHARGES, FEES AND TAXES. DEVICE MAY BE REFURBISHED. If you subscribe to plans with monthly minutes allotments, all call minutes placed from both from your home and registered ExtensionsTM phones will count toward your monthly minutes allotment. ExtensionsTM calls made from mobiles use airtime and may incur surcharges, depending on your mobile plan. Alarms, TTY and other systems may not be compatible. Vonage 911 service operates differently than traditional 911. See for details.

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