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AT&T Reaches Out; New Plan Will Offer Cheaper Calls Via Internet

Vonage In Print News

December 12, 2003

By David Ho

NEW YORK -- AT&T Corp. said Thursday it would offer Internet-based telephone service to consumers next year, joining the escalating race to transform the traditional phone call in the digital age.

The long-distance giant is taking its place beside regional Bell phone companies, cable companies and Internet start-ups as the lines among communications companies continue to blur.

Just this week, Qwest Communications and Time Warner Cable announced initiatives to bring consumers the new technology, called Voip or Voice over Internet Protocol.

The technology offers a lower-cost alternative to traditional service by converting voices into packets of data that speed over the Internet instead of traditional phone networks. Consumers often use an adapter to bridge high-speed Internet connections with normal telephones.

AT&T, the No. 1 U.S. long-distance company, plans to roll out its service in the 100 biggest U.S. cities early next year, said David Dorman, its chairman and chief executive. The company also plans to expand its Internet telephone service for businesses, which it began offering in 1997.

"VoIP is the most significant, fundamental new technology shift in telecommunications in decades and will deliver tremendous value to all customers," Dorman said. "Our voice-over-IP offer will be available in cities across America to customers with different kinds of broadband access."

AT&T did not reveal details about the service or its price, but Dorman said successful trial programs offering people unlimited domestic local and long-distance calling over the Internet prompted the nationwide effort.

The company's service will be competitive with other current Internet calling packages, which offer unlimited calling for around $35 to $40, company spokesman Gary Morgenstern said.

Sensing a coming revolution in communications, where the Internet offers cheaper rates and freedom from regulations that apply to phone companies, the industry giants have been scrambling to adapt.

On Monday, Time Warner Inc., owner of Time Warner Cable, said it will partner with Sprint Corp. and MCI Inc. to offer Voip service nationwide next year. 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.

Qwest on Wednesday announced it had begun offering Internet telephone service in the Minneapolis-St. Paul area of Minnesota.

"AT&T has millions of customers, many of whom might have been swayed by Voip competitors, which is why it's important for them to embrace the technology," said Jeff Kagan, an independent telecommunications analyst based in Atlanta.

He said the move was not purely defensive, because AT&T "will be able to offer all sorts of new integrated voice, data and video applications using this technology, which means growth opportunities."

By using the Internet to skip over traditional phone lines, AT&T also could potentially save billions of dollars in access fees that it has to pay local phone company competitors to use their networks to reach consumers. Those fees are the company's single biggest expense, costing nearly $11 billion in 2002.

Internet calling has so far made only small inroads for consumers in the telecommunications industry, 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.

Bigger Players

But analysts say the popularity of Internet phone service is expected to surge next year as these bigger companies enter the fray.

The field is already getting crowded.

Verizon has said it wants to have Internet calling services widely available for consumers next year. Cablevision, which serves more than 3 million subscribers in and around New York, began marketing an online calling service last month to its more than 1 million high-speed Internet customers.

Atlanta-based BellSouth has offered online calling services to businesses for two years, providing adapters so companies can link phones to the Internet, spokesman Todd Smith said.

Next year, the company plans to expand its business services, offering network-based Voip calling that requires no special equipment, but instead channels calls over the Internet rather than traditional networks.

BellSouth has announced no plans for a consumer Internet calling service.

"We certainly have the capability. It's just a matter if it makes sense to roll that out," Smith said.

AT&T's Internet calling service will offer capabilities including activity logs and call forwarding that can be managed online, said Morgenstern, the spokesman. He said the company may eventually offer an adapter that allows people to take their local phone numbers with them so they can make and receive calls anywhere they have an Internet connection.

Vonage Holdings Corp., a private company based in Edison, N.J., already allows customers to uproot their local numbers. About a quarter of its subscribers choose local numbers that don't match their geographic area.

Vonage is a leader among the small companies pioneering the new technology. Its number of customers swelled from 7,500 to more than 76,000 since it began offering Internet phone service a year ago.

Vonage customers pay a flat rate of $35 for unlimited calling in the United States and Canada, plus a host of features ranging from Call Waiting to voice mail messages delivered to e-mail.

The government is pondering whether fees that apply to phone companies should also be imposed on calls made on the largely unregulated Internet. Some of the fees, which phone companies often pass on to customers, go to a $6 billion program to subsidize phone and Internet service for schools and poor and rural areas. Other payments fund 911 services.

The Federal Communications Commission held a forum last week on Voice over Internet Protocol and announced the formation of a task force to study the technology and recommend how regulators should proceed. It could take a year or more for the agency to devise a new policy.

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  • Atlanta Journal Constitution, 12/1/03

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