EarthLink bundles broadband, telephone calls

Look out, Ma Bell. Telephone calls via the Internet are gaining traction.

By Michelle Kessler, USA TODAY

EarthLink, the USA’s No. 3 Internet service provider, announced Thursday the first mainstream Internet telephony service aimed at consumers. For about $90 a month, EarthLink customers can get unlimited high-speed Internet access and unlimited local and long-distance calls in the USA.

That’s comparable to similar bundles from telephone carriers, including Verizon Communications. It can be a good deal for those who call a lot, telecom analysts say.

On average, U.S. consumers pay $58 a month for local and long-distance service, research firm Gartner says. Broadband runs about $45 a month.

Because Internet calls zip over the Web, it makes little difference whether a call is to the next room or next state. A five-minute call via EarthLink over the Internet to Great Britain, for instance, would run 25 cents, or about half the standard international rate.

Still, Internet telephony, which has been around for seven years, has downsides. Sometimes, the voice quality is crystal clear, says Banc of America Securities telecom analyst Chris Crespi. Sometimes, it’s like a bad cell phone connection. Also, consumers would lose phone service every time the Internet connection goes down. Internet phones lack emergency features, such as 911. They could also slow a homeowner’s Internet connection. Even EarthLink says that its service is designed to be a second phone line.

But they’re "one more thing for phone companies to worry about," says Gartner telecom analyst Kathie Hackler. "It challenges the business model they’ve had for decades."

EarthLink’s service, powered by privately held Vonage, is one of the first to make home Internet calls as easy as regular calls. Customers use a regular phone, which they plug into an adapter. They can call anyone with any kind of phone.

That’s different than most other home systems. MSN, for instance, requires callers to talk into a microphone hooked up to a PC. Other systems require special phones. Early versions of the technology required sender and receiver to have the same PC software. With Vonage, the receiver doesn’t even need a PC.

Internet telephony is also growing because:

* It’s flexible. It isn’t regulated by the government the same way that regular phone service is. That means that an Internet phone can have any area code, regardless of where it is located. It can easily be moved to a new room or building without requiring a new number — a feature popular with businesses.

* It saves companies money. Many companies have built their own data networks. By sending calls via their own private pipes, they save money.

Still, Internet phones don’t cut out traditional phone companies completely. Most Internet calls pass through at least one pipe they own, giving them rights to a chunk of the phone fee, says TeleGeography analyst Patrick Christian. Many carriers have even built small Internet phone systems of their own, though they still rely largely on regular phone lines.

http://www.usatoday.com/tech/news/2003-03-13-netphone_x.htm