AOL to Offer Net Phone Service
America Online Inc. on Tuesday jumped into the local telephone market, announcing a service for making calls over the Internet.
AOL, the world’s No. 1 Internet service provider, said it would offer the service using voice over Internet protocol, or VOIP, to its 22.2 million U.S. subscribers within a month and to nonsubscribers later. The service, to be offered at a price AOL would not disclose, is expected to combine AOL’s instant messaging, e-mail and buddy list features with the phone service to provide several ways to communicate online.
VOIP phone service sends voice in packets of data, like e-mail, over high-speed Internet connections. Customers will receive an adapter that plugs into their regular phone handset, and won’t need to turn on their computers to use it, AOL said.
AOL Chief Executive Jonathan Miller told an industry gathering at the Voice on the Net conference here that the company, a unit of Time Warner Inc., wanted to tackle the $100-billion residential phone market.
“There’s a lot of money at stake,” he said.
AOL’s effort to wring more revenue out of its members will face heavy competition. Companies including Vonage Holdings Inc., AT&T; Corp. and Verizon Communications Inc. already sell VOIP service.
Although it is generally less expensive than standard phone services, the VOIP technology is just beginning to catch on among consumers. Miller said that only 4% of the residential market was using VOIP and that more than 60% of Americans still didn’t know what it was.
But AOL’s size could help push VOIP into prime time, said Dave Burstein, editor of DSL Prime, an industry newsletter.
“This could be big for AOL and consumers, because 1 in 7 online users are AOL members,” he said.
The company entered the Canadian market with VOIP late last year and is testing the service in Europe.
AOL will be using the nationwide network of Level 3 Communications Inc., which will pay regional phone companies for access to local lines.
The new service pits AOL against another Time Warner division: The company’s cable unit sells phone service. An AOL spokeswoman said the two divisions were discussing ways to work together.
Other big Internet companies, including Yahoo Inc. and Google Inc., also are considering whether to jump into the market, analysts said.
Yahoo already sells Internet service through ventures with Verizon and SBC Communications Inc. and worked with BT Group, Britain’s largest phone company, to offer a computer-based phone service in England.
A Yahoo spokeswoman said the company was “taking a close look” at offering VOIP service. A Google spokesman declined to comment.
