Qwest to offer Net calls in Minn.

Telco targets state to start new service

Qwest Communications plans to launch telephone service over the Internet to the mass market starting with Minnesota, the Denver telco said this week.

By Jeff Smith, Rocky Mountain News

The technology, known as voice over Internet protocol, or VoIP, enables consumers to make and receive telephone calls using an Internet-compatible device.

Qwest Chief Executive Richard Notebaert indicated at an industry forum that the service likely would be offered in a package with high-speed Internet service such as DSL.

The plan comes as Internet telephony finally appears to be gaining market traction. It also appears on the heels of a federal judge’s ruling that overturned an attempt by the state of Minnesota to regulate such services.

The staff of the Colorado Public Utilities Commission is studying the issue but hasn’t made a recommendation.

Notebaert told an industry forum, sponsored by the research group The Yankee Group, that Qwest sees an opportunity to "begin to break up the regulatory logjam" that traditional telcos face these days.

But Notebaert said the regional Bell wouldn’t offer the service as a way to dodge paying fees that subsidize rural customers or high-cost areas, or as a way to avoid providing a 911 emergency service.

Part of Qwest’s intention apparently is to head off new competition from the likes of Internet telephony provider Vonage Inc., which offers unlimited local and long-distance calls for as little as $35 a month.

Qwest also will be able to more effectively leverage its nationwide fiber-optic network through Internet telephony.

The long-awaited industry has been gathering steam.

Internet telephone line shipments in the United States increased 80 percent between the second quarter of 2002 and the second quarter of 2003, according to one research group.

Broomfield-based Level 3 Communications has developed several Internet telephony products, including one that is being resold by the regional Bell SBC Communications.

Avaya Inc., which has more than 2,500 employees in the Denver area, also has become a big equipment provider, with growth rates exceeding that of the Internet telephony industry overall.

On Tuesday, Avaya announced a partnership with California-based Extreme Networks designed to further help businesses integrate their telephone and data networks. Company officials cited an example of a 31-building Michigan school district that is saving $350,000 a year by doing so.

Qwest spokesman James Thurman said the company wasn’t ready to disclose a possible timetable for launching a voice over IP service in Minnesota or elsewhere in its 14- state region.

Still, Notebaert’s mere pronouncement was bold given the lingering regulatory uncertainty.

Dianne Northfield, program manager of global regulatory strategies for The Yankee Group, noted this week that a number of states still are considering regulating Internet telephone services, and the Federal Communications Commission has yet to weigh in on the issue.

That makes Qwest’s timing interesting, she said. In an e-mail, she said she viewed Notebaert’s announcement as a "strong move to act despite, or in spite of, the policy vacuum" as well as a challenge to state regulators and the FCC to set policy.

"Qwest stands out from its peers in taking this stand now," Northfield wrote.

Terry Bote, spokesman of the Colorado Public Utilities Commission, said state regulators may start taking up the issue as soon as this month.

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