RealTime IT News

AOL: VoIP Has Nice Ring

America Online is testing a Voice Over IP service, as it seeks the right mix of products and pricing to halt sliding subscriber stats.

Anne Bentley, an AOL spokeswoman, confirmed the move but would not disclose details. The service will reportedly be ready for launch in 2005 if all goes well.

The Time Warner subsidiary is the latest in a parade of telecom carriers, cable operators and ISPs looking to benefit from surging demand for flat-rate calling plans.

Among the others aggressively rolling out VoIP are: long-distance provider AT&T ; regional operator Verizon ; and well-funded start-up Vonage.

Time Warner Cable, which is owned by the same parent as AOL, also offers VoIP. It bears watching to see if the two strategies will create any friction or opportunities for cooperation.

Another new entrant is Charter Communications . The nation's third-largest cable provider said yesterday it will offer VoIP to 1 million of its customers by year's end, using Level 3's and Sprint's networks.

In addition to consumers' and businesses' desire to save money, a number of factors are creating a fertile environment for VoIP to take hold. Broadband connections in the United States continue to rise, the cost of equipment has fallen and federal regulators have indicated a hands-off approach.

Though a little late to the VoIP game, AOL still has 23 million subscribers, 4 million of whom have broadband hookups, which is a prerequisite for Internet telephony.

AOL is looking to offset flagging subscriber numbers. During the second quarter, the ISP shed 668,000 subscribers. Cheap VoIP service could give customers a reason to stick with the venerable ISP.

Joe Laszlo, an analyst at JupiterResearch, wrote in his Weblog that VoIP from AOL makes sense. (JupiterResearch and internetnews.com are owned by Jupitermedia.) Questions remain about pricing, however, as increased competition has brought down monthly rates during the last year.