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Dialing through the recovery

Scores of new products and a war of words over local phone service will highlight Supercomm 2004 in Chicago.

Concerns about spiraling local phone rates threaten to overshadow the technological advances set to be unveiled this week at Supercomm 2004, the U.S. telephone industry's most important annual trade show.

Earlier this month, a court order went into effect that erased federal rules forcing Verizon Communications, SBC Communications, BellSouth and Qwest Communications International to share their local phone networks with competitors at government-set rates. Without the rules in place, the Bush administration and consumer advocates, plus carriers AT&T and MCI, fear that local phone rates will rise.

That's put the four Bells on the defensive, just as the thousands of telephone executives gather in Chicago for what has traditionally been a celebration of the Bells' local phone networks.

"Look around the competitive landscape--there's wireline, wireless and voice over Internet Protocol," Verizon Vice Chairman Larry Babbio recently said.

His sentiment will be echoed over the next four days by major Bell executives, such as SBC Chairman Ed Whitacre, whose keynote speech on Tuesday is expected to focus on the opportunities created for the entire telephone industry by the change in the rules.

Cable companies, part of the U.S. phone industry's new competitive landscape, will have a more prominent role at the show than in years past, with Don Logan, chairman of Time Warner's media and communications group, scheduled to give a major keynote address.

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The top U.S. cable providers are all, in varying degrees, changing the face of the phone industry by using voice over Internet Protocol (VoIP) technology to anchor broadband-based phone services that are sold at rates up to half of what the Bells charge. The calls are cheaper, because they use the Net rather than the heavily regulated and taxed local phone network.

Representatives for major cable providers Time Warner Cable, Cox Communications and Comcast plan to be at the show but intend to keep a low profile. However, that's going to be all but impossible. Cable companies have been anointed by some as the newest competition for the Bells, now that local phone leaders MCI and AT&T say they will scale back their local phone business if the Bells raise their rates.

"Everybody is watching what cable does very closely, for all the right reasons," said Jim Pertzborn, an IBM vice president.

Lightning DSL, hot-spot cops and cheap video phones
Competing for attention over the din of the debate over local phone rates will be several new advances from major telephone equipment makers and service providers.

Many of the major developments will involve VoIP. In combination with cheaper phone calling, the technology opens the door to new services, such as videophone access and Web-based management of phone accounts not available to callers on traditional networks.

Verizon has hinted that it will soon launch its first VoIP local phone service, which will be marketed primarily as a second phone line into the home. A higher-quality and more expensive service is expected to debut by year's end. The other three Baby Bells have already begun selling VoIP service, which they say will ultimately replace their traditional local phone plans.

"In the telecom space, we don't know of anything else as critical to carriers as VoIP," said Raj Sharma, president of NexTone Communications, which manufactures equipment that carriers use to hand off data and voice traffic between their networks.

Meanwhile, Skype Technologies, which supplies a free, peer-to-peer Net phone service, intends to unveil on Monday a version of Skype for the Linux operating system. The expansion is part of a host of improvements to the service, which includes SkypeOut, a feature that lets Skype users call people with traditional phones. It's already available in Europe and is set to arrive in the United States later this year.

8x8, a VoIP provider, has said it will introduce the cheapest videophone yet at the show. The price of the Packet8 DV326 Desktop Videophone is expected to be at the $100 level, according to sources.

But VoIP is not the only show in town. Many of the products introduced at Supercomm will be aimed at large corporations, such as IBM's new BladeCenter-T, one of the first servers from Big Blue to be specifically designed with telephone services in mind, according to Pertzborn.

Big Blue also plans to unveil on Monday a partnership with Wi-Fi security company AirDefense that will see the computing giant incorporate AirDefense's products in its services.

In addition, Lucent Technologies is set to unveil, among other items, mobile messaging equipment for wireless service carriers. It'll allow people to use PCs to hear or read messages stored on a handset.