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

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 are owned by Jupitermedia.)
Questions remain about pricing, however, as increased
competition has brought down monthly rates during the last year.

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