AT&T introduces unlimited local and national long-distance telephone calls over high- speed Internet lines for broadband users

Move seen as start of competition in high-speed Net industry

AT&T has rolled out a new service that allows Bay Area residents to make unlimited local and national long-distance telephone calls over high- speed Internet lines, becoming the first major phone service in the state to enter this nascent industry.

Verne Kopytoff, Chronicle Staff Writer

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The calling plan, CallVantage, promises to significantly reduce phone bills for some subscribers. It also signals the beginning of what will likely be an all-out war between AT&T and its competitors to lure customers to this emerging technology.

AT&T’s service, which normally costs $39.99 per month, is available to any consumer or business with high-speed Internet access. Subscribers can make calls on existing telephones, but they must first install an adapter, which takes at least 10 minutes.

The technology AT&T is using is voice over Internet protocol. It allows voice to be transmitted over the Internet as packets of data and then reassembled into audio for the person on the other end of the line.

The technology has been around for several years, but has gained only a modest following. Early versions using dial-up connections offered an earful of echoes and dropped calls, but the quality has improved with broadband.

"Now it’s ready to take off," said Cathy Martine, the vice president who is leading AT&T’s Internet calling initiative.

However, David Willis, an analyst for the Meta Group, a market research firm, gave a more conservative review. He said that the sound quality is better than on cell phones, but still not good enough that "grandma is going to install (it) this week."

"The service quality isn’t as good as we are seeing with traditional wire line services," Willis said.

Until May 31, AT&T is offering customers who sign up for a year of CallVantage a rate of $19.99 for the first six months and $39.99 thereafter. Extra taxes also apply.

International calls cost extra.

Included in the CallVantage package are call waiting, caller ID, three- way call conferencing, voice mail and call forwarding.

CallVantage is significantly cheaper than AT&T’s comparable unlimited wire-line call plan. Called One Rate USA, it costs $48.95 per month and doesn’t include any extra features.

Many of AT&T’s competitors such as Qwest, Verizon and MCI are either testing their own Internet calling service or at least considering creating one.

John Britton, a spokesman for SBC, the Bay Area’s dominant local phone company, said it is working out the details for offering the service to residential customers. SBC already offers it to businesses.

One holdup, Britton said, is figuring out how to prevent losing the connections during power failures. Under such circumstances, AT&T subscribers would be unable to make calls.

Companies such as AT&T are intensely interested in the technology as way to stem their eroding business. Local phone companies such as SBC have expanded into long distance and are stealing their customers.

"The long-distance market is fading fast," said Willis, the analyst.

Small companies such as Vonage and 8×8 have offered Internet calling plans for a few years. Although they have attracted attention in the media and the telecom industry, they haven’t reached a broad customer base.

All the companies in the emerging industry want to capitalize on the spread of broadband.

Elka Popova, an analyst for Frost & Sullivan, a market research firm, said that only about 1.5 percent of all residential broadband users subscribe to an Internet calling service. By 2007, the total is expected to increase to at least 10 percent, she said.

Analysts cautioned that Internet calling isn’t for everyone. Aside from the quality issues, setting up from scratch just to make calls can be costly, they said.

The monthly bill for broadband starts at $30. When the price of a plan like AT&T’s is added, plus taxes, total monthly cost can approach $80.

E-mail Verne Kopytoff at [email protected].