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Monday, July 26, 2004
Verizon Launches Internet Phone Service

Verizon Communications Inc. launched an Internet-based phone service aimed at competing with a growing list of start-up firms and cable companies targeting Verizon's customers.

Verizon said its VoiceWing service, offering unlimited local and long distance phone calls, was available in 33 states for a standard price of $34.95 for Verizon high-speed Internet customers and $39.95 for non-Verizon customers with broadband Internet connections, with six-month introductory discounts for each.

The long-expected move by the nation's largest telephone company comes as Internet calling services from competitors such as Vonage and AT&T Corp. (T.N: Quote, Profile, Research) are already facing pricing pressures. In addition to smaller firms, cable companies including Comcast Corp. (CMCSA.O: Quote, Profile, Research) are aggressively moving into voice services.

Bob Ingalls, president of Verizon's Retail Markets group, said while some competitors were priced lower, Verizon expected a small premium for its brand and network quality.

Internet calling services use a technology known as voice over Internet protocol, or VOIP, to transmit phone calls in the same way Web pages and e-mail are sent over the Internet. That technology makes calls less expensive than traditional phone services, which require a dedicated circuit for each connection.

While VOIP has been around for years, recent technology advancements and the spread of home broadband connections have made it easy for small and large companies to launch VOIP services. Industry research firm Gartner Inc. forecasts that by 2008, about 17 percent of North American phone lines -- about 23 million -- will have been replaced with VOIP service.

While VoiceWing might threaten to cannibalize Verizon's traditional phone business, Verizon requires its broadband customers to buy a regular phone line as well. Ingalls said the company was working on offering stand-alone high-speed Internet access in the near future.

UBS analyst John Houdlik said even though VoiceWing could take customers from Verizon's traditional service, at least the customers would still be doing business with Verizon.

"We believe the offering is a necessary defensive move by Verizon to defend its access lines from competition from cable telephony and other access agnostic VOIP providers," Houdlik said.

From Reuters

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