Experts have long predicted the death of traditional home telephone service, in large part because of the deployment of wireless services such as the cellular telephone.
Plain old telephone service, as it is known in the industry, will die. But it turns out its executioner will more likely be Voice over Internet Protocol (VoIP), rather than the cell phone.
VoIP is finally beginning to gather steam in the United States. The technology uses a high-speed broadband Internet connection to make telephone calls. The calls travel at least part of the way on an Internet protocol network rather than the public switches that make up the telephone infrastructure.
A number of companies are introducing products designed for VoIP, including Agere Systems. VoIP offers broadband providers a marketable service beyond Internet access. That dovetails with the rise of broadband subscription rates as people prefer higher speed connections at home.
VoIP calls are typically cheaper than normal switched calls because the telephone provider does not have to open a dedicated circuit as it does in traditional landline telephone service. Instead of circuit switching, VoIP uses packet-switching to send the data signals that make up a phone call in chunks. It sends calls over a data network like one of the many networks that make up the Internet.
Vonage, an Edison, N.J., broadband phone company, is offering VoIP calling plans for local and longdistance service priced from $14.99 to $29.99 a month, not including cost of broadband connection. AT&T's IP calling plans are priced from $19.99 as an introductory rate to $34.99 a month for unlimited local and longdistance calls. With some VoIP services, there are no taxes and no access fees.
"It will probably be the biggest transformation in telecom in 100 years," said Verizon spokeswoman Briana Gowing. "There have been enhancements over the years, but this is really shaking things up."
This summer, Verizon will offer its digital subscriber line (DSL) customers a converter box with an adapter that will allow customers to make IP-based calls. The box converts the telephone's analog signals to digital. The adapter will connect a consumer's telephone with a computer modem that will send calls out over the Internet. Verizon has not said how much the box will cost. The company will be offering new VoIP calling plans with the boxes.
The company has 2.7 million DSL subscribers in the United States. The new VoIP technology offers an alternative to traditional telephone service in more ways than one. AT&T's VoIP service is a way for the company to offer local service without renting parts of the telephone network from Verizon and the other Baby Bells. That allows the company to increase its customer base and offer services that don't include access fees.
Some cable companies also offer Internet protocol calling.
VoIP, or Voice-over-DSL, as one form is called, has been slow to catch on in the United States partly because of the vast legacy infrastructure left over from the Bell Telephone monopoly. The current state of competition in which upstart phone companies must rent network components from the Baby Bells has slowed the proliferation of VoIP. Federal regulations have until recently forced the Baby Bells to open up their network to competitors, which creates a disincentive to upgrade the network.
"They are worried if they implement a new technology, other companies will rent their network," said Samir Samhouri, marketing director for Agere's multiservice networking division.
Other countries such as South Korea are far ahead of the United States in use of VoIP, in large part because they have accelerated the deployment of broadband. The new calling technology requires a high-speed broadband connection from via cable modem, DSL or fiber optics.
Another reason for the lag in VoIP's popularity up until now is a significant service-reliability issue.
"The quality has only recently improved enough for people to take it seriously," Gowing said.
Many experts predicted consumers would abandon traditional telephone service once cell phones proliferated. But because of the unreliability of cellphone service, 95 percent of mobile subscribers still have a traditional landline, according to the Yankee Group, a research firm.
Instead, VoIP is the technology that could cancel existing local telephone service contracts. RHK, a telecommunications research firm, said 11 million VoIP subscribers use DSL to connect. That number will grow at a rate of 90 percent a year through 2007, RHK said.
Industry insiders say telephone service providers have few reasons not to get behind VoIP. Skyline Marketing President John Celentano, who gave a presentation at the Supercomm convention last month in Chicago, said increased competition and customer demand render the technology an essential product. VoIP's also offers lower capital investments.