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AOL voice chat unveils new face of IM

With the inclusion of voice services to America Online's instant messaging technology, one of the Internet's most popular applications is starting to act very much like a telephone.

With the inclusion of voice services to America Online's instant messaging technology, one of the Internet's most popular applications is starting to act very much like a telephone.

Last week, AOL released a new version of its successful Instant Messenger (IM) program that will allow people to talk to each other using a PC and a microphone. Though a relatively untested market, the new offering is yet another indication of the closing gap between Internet technologies and traditional communications.

Today, telephone networks are being used as much for data as for voice, and telephone companies are reinventing themselves as high-speed Internet providers. Now, in turn, Net companies are using new Internet-based technology to increasingly offer voice services online.

But don't unplug the telephone yet, analysts say. Voice services are likely to be a popular add-on to any number of Internet applications, but traditional phone technology isn't going to disappear any time soon.

"The benefit of the phone is that anyone can talk to anyone else," noted Boyd Peterson, a telecommunications analyst with the Yankee Group. "Until you get to that point, [Internet-based services] are going to be very different."

Talk to me
Voice over the Internet isn't a new concept--companies such as Net2Phone or VocalTec have provided telephone-like services online for several years.

But these services have taken a back seat to the overwhelming popularity of text-based instant messaging, a market led by AOL's Instant Messenger and ICQ products. With 31 million and 44 million registered users respectively--though many of these users may be single individuals registered under several different online aliases--these products jointly reach one of the largest online audiences.

The idea for real-time phone conversations online has floated around for years. ICQ has long been able to support voice applications like NetMeeting or VocalTec's Internet Phone. AT&T supports a service that allows chat room participants to phone each other while still chatting online. Excite@Home added a voice chat to its free services last summer. But those services have not been half as successful as text-based email or messaging, analysts say.

These companies are nevertheless drawn by the profit potential of the new market. U.S. residents spend more than $100 billion on local phone service every year, and about $90 billion on long distance phone calls. Capturing even a small slice of that market could be an economic boon for Internet telecommunications upstarts.

But established telephone companies aren't yet worried about the competition.

Even if millions of users began switching to Net-based communications like IM for voice calls, the Internet traffic would still be travelling over the telephone companies' networks. This translates to continued revenue for the phone companies.

SBC Communications, Bell Atlantic, and GTE have already signed agreements with America Online that will allow the service provider to offer its Net services over their high-speed digital subscriber lines (DSL). This will likely cut into the phone companies' ISP business, but will mean increased use of their infrastructure, analysts say.

Puppet masters: Who controls the Net "AOL got out of the network business," said Jupiter Communications analyst Seamus McAteer. "I see AOL working hand-in-glove with the telephone companies, rather than competing with them."

Nor does AOL itself claim to have designs on Ma Bell's business.

"This seems a natural progression from our existing chat," said spokeswoman Anne Bentley. "But I don't think we're planning on taking over the world and replacing the telephone."

The big local phone companies are doing their best to create online telecommunications portals for their high-speed Internet customers, where users can order and manage their telephone services. But they're focusing more on allowing access to telephone services online, rather than replacing them with Net-style communications like instant messaging.

"Pacific Bell is looking into instant messaging, along with many other things," said Michelle Stakowsky, a spokeswoman for SBC Communications' California division. But no messaging product was imminent, she said.

Customers' adoption of alternative Internet voice products, on top of existing text message services, could undermine the telephone companies' attempt to expand their roles as the center of users' communications lives, some analysts say.

But these voice features will remain as add-ons to popular data products for some time, analysts say. The phone is simply too popular, too widespread, and too easy to use to be easily replaced.

"It is an indication of where voice services will go in the future," said Yankee Group's Peterson. "But people are used to [the phone]. It's cheap and it works. That makes it hard to replace."