- The Washington Times - Wednesday, April 6, 2005

America Online Inc. will introduce a service today that allows customers to make telephone calls over the Internet, giving them access to a small-but-growing form of technology that tends to offer cheaper rates but greater security risks.

AOL Internet Phone Service will include features available through many traditional phone packages, including an unlimited long-distance plan, voice mail, call waiting, caller ID and 911 calling coverage.

Customers will be able to use traditional telephones. The calls can be made to any number, including those that are not connected to AOL.

Digital telephone services like AOL’s are made possible through a technology called “voice over Internet protocol” that allows consumers to make and receive calls over high-speed Internet lines instead of traditional telephone wires. Other companies have introduced VOIP service, including cable television giant Comcast Corp.

“The cost savings and the ease of use are significant,” said James Tobin, vice president of voice strategy for AOL, the world’s largest Internet access provider with about 32 million subscribers in the United States and Europe.

The Sterling, Va., company will charge new customers who sign up for the service about $30 a month for the first six months, and then it will raise the price $10.

The fee will cover the cost of AOL’s Internet connection service. Existing AOL customers will be charged between $14 and $30 to add the service.

Callers in the Washington area spend an average of $51.53 per month on traditional phone service, according to an AOL survey of 2,000 adults.

The average household spent $83 on telecommunications services in the United States in 2002, including $12 for long-distance services and $35 for wireless services, according to the most recent data available from the United States Telecommunications Association, an industry trade group.

Fewer than 1 million households are using the Internet to make phone calls, but that number is expected to rise dramatically over the next decade, said Elroy Jopling, an analyst for Gartner Inc., a technology research service in Stamford, Conn.

“It’s the bottom end of the hockey stick. It’s really embryonic,” he said.

Low costs will drive growth in VOIP and make consumers more willing to put up with a service that can be spotty unless it is operated through a reliable broadband network, Mr. Jopling said.

“The phone companies have been around 100 years so they have had a lot of time to solve the reliability problems,” Mr. Jopling said.

A survey of 1,132 Internet-connected households by Forrester Research Inc. in Cambridge, Mass., found just 13 percent were interested in VOIP. Most consumers said they were satisfied with their traditional phone service.

Calls made over Internet lines are vulnerable to the same kind of safety threats that plague e-mail and the Web, security experts say.

Scam artists can use online caller ID features to make it appear as though they are calling from a bank or other trusted source, making it easier to dupe consumers into surrendering valuable information, the experts say.

AOL has made “significant investments” in security features to make calls made over its network safe, Mr. Tobin said.

“We’ve led the fight on a lot of Internet security issues, and we’re going to take the same approach here,” he said.

AOL is the most recent company to enter the VOIP market.

Vonage Holdings Corp. in Edison, N.J., bills itself as the “broadband phone company,” operating about 550,000 Internet phone lines for households and businesses.

Comcast announced plans in January to begin selling Internet phone service to 40 million customers by the end of 2006.

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