AOL unveils VoIP plans

Net phone service is due in a month, heightening pressure on rivals such as Yahoo to follow suit.

Jim Hu Staff Writer, CNET News.com
Jim Hu
covers home broadband services and the Net's portal giants.
Jim Hu
2 min read
SAN JOSE, Calif.--America Online will launch an Internet phone service within a month, company CEO Jonathan Miller said Tuesday.

As previously reported, the service will use an adapter to link ordinary handsets to a broadband connection. The service can also be accessed through a PC and will be integrated with AOL's popular instant-messaging and e-mail software, Miller said in a presentation here at the Voice on the Net, or VON 2005, conference. He added that wireless options are planned down the road but did not provide a time frame.

"There's a lot of money at stake," Miller said. "It's a big, big business, and everyone has to pay attention to it."

Internet phone services highlight both opportunities and dilemmas for AOL. The world's largest Internet access provider is working to offset declining subscriber rates for its core dial-up service. AOL wants to return to the good graces of parent Time Warner after the rocky merger of the two companies at the height of the Internet boom in 2000.

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Like Yahoo and Microsoft, AOL already offers voice chat on PCs as a free feature of its instant-messaging services. AOL's new phone service, by contrast, will charge customers a monthly fee to make calls over the Internet using an ordinary handset and a small analog-to-digital telephone adapter.

AOL has been testing a United States-based phone service with volunteers since last summer, and it launched a similar service in Canada in December.

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Miller declined to comment on pricing but said there would be several tiers, from flat-rate to metered plans. Sources have said the cost of AOL's service will be competitive with other VoIP offerings in the market, in which one low-cost provider, Vonage, charges $24.99 a month for unlimited local and long-distance calling. The AOL service will cost less than the $40 Internet phone service offered by corporate cousin Time Warner Cable, the sources added.

Miller said AOL's phone service will be offered only to members, for now, but will be opened up to the general public in the future. He added that the service will be offered to customers of Time Warner Cable's Road Runner ISP featuring AOL.

Miller said the service will be launched in partnership with Sonus Networks and Level 3 Communications, which will provide switching services and infrastructure, respectively.

AOL's plans could be a prelude to similar services from the company's biggest Web rivals--Yahoo, Microsoft's MSN and Google.

Yahoo and MSN have long offered rudimentary phone service using their instant-messaging software and a PC. Now there are signs that all of the major Web portals are exploring whether it makes sense to further expand those offerings.

Yahoo has already launched a PC-based voice service in the United Kingdom. Microsoft plans to embed voice calling into its enterprise instant-messaging software. And rumors continue to swirl about whether Google is building the foundation for its own VoIP project, starting in the United Kingdom.