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VoIP Rings Up Explosive Growth

Internet telephone service is explosively growing from a nascent idea to a viable market contender to traditional phone service, according to the latest numbers released by the Telecommunications Industry Association (TIA).

According to TIA, the number of residential Voice over IP customers more than tripled to 4.2 million users last year and is expected to hit 18 million within the next three years.

The huge jump in VoIP numbers follows an eightfold increase from 150,000 at the end of 2003 to 1.2 million at the end of 2004. The TIA numbers do not include PC-to-PC VoIP connections.

The TIA said the growth in the number of VoIP connections is being driven by a number of factors, not the least of which is the dramatic rise in residential broadband users.

"VoIP works best over a broadband connection, and utilization of this existing connection also lowers the cost of providing the service," the TIA said in a statement.

The U.S. broadband market has grown from 4.5 million subscribers in 2000 to 41.3 million subscribers in 2005. It is expected to grow an additional 28 million to 69.2 million by 2009, a 13.8 compound annual increase.

The TIA numbers also note that VoIP revenue is enjoying the same growth rate as VoIP subscribers, with revenue increasing from $25 million in 2003 to $1.1 billion last year.

The trade group projects VoIP revenue growth to increase 46.7 percent on a compound annual rate through 2009 reaching $5.1 billion.

Part of that growth will come from beyond the residential market.

"VoIP carriers are now moving beyond the residential market to address the small-business market and are beginning to introduce services geared to small businesses, which bundle a number of lines and minutes for a flat price or which bundle VoIP with broadband services," according to the TIA.