AOL to Launch VoIP Service

SAN JOSE, Calif. — AOL will launch its own brand of
software next month that uses the Internet to make phone calls, said Jonathan Miller, AOL chairman and CEO, during his keynote at the VON Spring 2005 show here today.

AOL Internet Phone Service is expected to have
the same look, feel, feature set and functions as its popular Instant
Messaging (IM) product. Similar to its rivals Yahoo and Microsoft, AOL
already offers voice chat as a free feature of its IM platform.

“We believe that this is the right time … there is electricity in
the air and in this case it is carrying our voice,” Miller said. “It puts the power back in people’s hands and gives them the ability to screen and select calls… the ability to be seen, not be seen…. and the ability to switch
instantly from an instant messaging to a phone call.”

The company has been testing the platform since August, using Voice over IP to connect phones to computers without the need for traditional phone lines. The company said
customers would only need a software install and a small analog-to-digital telephone adapter to run the service.

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, will
help roll out AOL’s service, Miller said. Other partners include
E-911, as well as other packet management support from Level 3 and switching
technologies from Sonus.

“We think we can utilize our national footprint, because there is a
gap in the industry and we think we can help out with that,” Miller
said.

AOL’s announcement comes as VoIP is gaining in popularity. Analysts with JupiterResearch estimate VoIP telephony services will grow to 12.1 million households by 2009, representing about 10 percent of all U.S.
households. Additionally 17 percent of all U.S. broadband households
will use a VoIP telephony service in 2009, up from 1 percent by the
end of 2004.

Miller said AOL will have an advantage over its rivals since
mainstream customers are more brand-loyal than their early-adopter
counterparts.

“Early adopters understand that there are bugs and problems with the
technology in its first stages,” Miller said. “Mass markets want brand
and they want to know something works from a trusted source for a good
value.”

AOL’s product may also drastically differ from its competition in
that the company has indicated it will charge customers a monthly fee
instead of a per-call model.

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