Telecommunications consultancy Phillips Tarifica reports that 44 million people will be on the Internet by that year. And they will increasingly abandon the traditional telephone, the study predicts, opting instead for email and Internet telephony for long distance conversations.
The study forecasts a $225 million loss from business customers alone for AT&T. The long distance giant is also expected to lose $125 million from residential customers, with $97 million going to Internet phones and $28 million to email.
As their quality improves, Net phones are expected to become more popular internationally, forcing companies like AT&T to get in the game or potentially lose that business. European carriers will fare better in their competition with the Net, the report states.
"Comparatively AT&T will lose more than other major telcos," the study states. "The average international call duration is higher among the U.S. customers, so that if it is substituted by one of the Internet applications it implies a higher loss in terms of revenue."
VocalTec, Microsoft, and Netscape Communications pioneered some of the first Net phones, which allow users to engage in CB radio-style phone conversations online. Other companies, such as Lucent Technologies and Rockwell, have also built gateway software that links standard phones over the Internet.
AT&T said it wasn't worried about the study's findings. "The report is an awfully ambitious prediction only because there is so much uncertainty in a market that is changing so fast," company spokesman Mike Miller said.
But he did acknowledge AT&T's interest in being a player in this technology, should the prediction show signs of truth. "Internet telephony is a potentially large opportunity for AT&T, and we're looking into it," Miller said.