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Hearing the Call

Not quite ready to cut the cord? Never fear—your local Bell will offer VoIP, too.

It's one of those left-handed compliments not exactly coveted by the many start-ups who've pioneered IP telephony: They're doing so well, the Baby Bells plan to offer VoIP, too.

On the other hand, the decision by all four Regional Bell Operating Companies (RBOCs) to push phone calls over the Internet should reassure entrepreneurs wondering if they can trust business calls to a technology that had a somewhat bumpy start. Clearly, VoIP is here to stay-with "clearly" being the operative word. Faster Internet connections and better audio and routing software seem to have eased early quality-of-service concerns. Now VoIP is even being ratified by the telecom giants whose profits it undercuts.

That doesn't mean you'll completely leave traditional phone service behind anytime soon. Digital communications market research firm In-Stat/MDRfigures that about 5 million homes and 2.2 million businesses will be making phone calls over the Internet by 2007-yet that's just a fraction of the 110 million customers of the Public Switched Telephone Network (PSTN).

That will be enough, though, to change the way phone services are priced, says In-Stat/MDR senior analyst Daryl Schoolar. Expect more all-you-can-eat billing plans and fewer toll charges, even for those sticking with PSTN. Businesses, which tend to log the most toll and long-distance charges, stand to benefit most. Likewise, the more office lines you have, the lower your per-line monthly rate is likely to be.

Most Bells haven't detailed their IP pricing, but figure on them being competitive with SBC Communications PremierSERV hosted IP service, which is already being sold to businesses in the company's 13-state service area. Monthly PremierSERV dialing plans start at $29 per station per month for unlimited local calling to any phone. (Some carriers serve only IP phones.) For $39 per station per month, you can make unlimited long-distance calls to anywhere in the continental United States.

The only pieces of equipment you'll need are IP-capable handsets or analog/digital adapters for your traditional desk sets, says Laura Slagle of SBC. SBC sells the latter for $200, but you can find your own for as little as $75 on the Web.

Qwest Communications International, BellSouth and Verizon Communications plan to roll out their own business-class IP telephony in select cities by summer and across their entire service areas by year-end. By then, says Slagle, SBC plans to be in the top metropolitan areas of its RBOC cousins. Unregulated IP telephony lets the Bells break out of their traditional oligopolies to court each other's customers. Besides VoIP start-ups, they'll also be fending off well-heeled cable rivals with their discounted TV, Internet and phone bundles.

However this plays out, it looks like a century-old pricing system is about to be introduced to a novel concept called competition.

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This article was originally published in the February 2004 print edition of Entrepreneur with the headline: Hearing the Call.

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