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AT&T set to offer calling via Internet ; Service in key markets to begin early in 2004

Posted on: Friday, 12 December 2003, 06:00 CST

AT&T said Thursday that it plans to offer consumers Internet- based telephone service, a technology that threatens to change the face of the nation's telecommunications industry.

The Bedminster-based telephone giant joins a fast-growing group that includes former Baby Bell Qwest Communications and cable powerhouse Time Warner Cable, which both announced plans this week to sell Internet-based phone calls, also referred to as voice-over- Internet Protocol, or VoIP.

AT&T - the nation's largest long-distance phone provider - said it plans to introduce a VoIP package of unlimited local and long- distance service to consumers at a lower price than traditional phone service beginning in the first quarter of 2004 in key markets.

The company wouldn't identify those markets, said AT&T spokesman Bob Nersesian. AT&T has been testing VoIP for consumers since October in three states, including New Jersey.

The company also did not disclose pricing, except to say the consumer offer would include unlimited local and long-distance for a flat monthly rate that will include various calling options.

AT&T's VoIP service will be available to consumers who subscribe to a high-speed Internet service such as DSL or cable.

Lee Selwyn, president of Economics and Technology Inc., a Boston telecommunications research firm, said VoIP will eventually bring about fundamental and massive changes in the way telephone networks are used.

"Things will never be the same," Selwyn said.

As opposed to traditional phone networks where voice is transmitted by opening up a circuit between two callers, VoIP converts voice conversations into bits of data.

Those bits then travel over data networks, including the Internet, and are reconfigured into a voice conversation on the receiving end.

If VoIP becomes widespread - as analysts predict and AT&T's announcement suggests - then it's possible that large numbers of calls will go from one person using a VoIP phone to another person with VoIP service.

That means the call will never touch the traditional telephone network and thus never be subject to access fees that phone companies now pay each other to carry traffic - fees that total billions of dollars annually.

Today, some VoIP companies let you pick an area code. For example, a customer could choose a 201 area code but live in California; relatives based in New Jersey could call that number for the price of a local call and skip long-distance charges.

Some analysts suggest that VoIP could threaten local phone companies like Verizon, which own the traditional copper phone lines into most homes and depend in part on collecting access charges from other phone companies that send calls via its network.

Verizon denies VoIP threatens its existence and says it's evolving with the technology and plans to offer VoIP to consumers early next year.

VoIP technology is not new, but has improved greatly in recent years. That improvement has led to a number of fast-growing start- ups such as Vonage and North Brunswick-based VoicePulse offering unlimited voice and long-distance service to tech-savvy consumers looking to save money on their phone bills.

Vonage sells an unlimited calling package for $35 a month.

Cable companies are also busy introducing VoIP service - Cablevision, North Jersey's largest cable company, recently rolled out its Optimum Voice service, which it sells for $35 a month.

Consumers still have to pay an additional monthly charge to get broadband Internet service, which can range from about $30 to $50 a month and up.

VoIP has some drawbacks - it won't work if your power goes out, for example. But some analysts believe this problem won't stop its growth and will eventually be solved.

The Federal Communications Commission began hearings on VoIP this month to explore issues including whether or how it should be regulated.

AT&T said its consumer service (the company has been selling VoIP to businesses since 1997) will work by plugging a phone into a small adapter box that connects to a customer's high-speed Internet service.

Since the technology converts voice conversations to digital signals, VoIP phone service can provide a wide range of computer- based communications features.

For example, AT&T customers will be able to take their adapter box anywhere they have access to a broadband connection, such as a hotel or dorm room, and place calls.

Using a personal computer, customers will be able to set their VoIP service to do things such as have an incoming call ring three times on a VoIP phone at home, and, if it's not answered, transfer the call automatically to a cellphone.

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E-mail: mckay@northjersey.com

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