Verizon Communications Inc., the nation's biggest telephone company and the principal carrier in Maryland, will announce today that it is introducing Internet-based phone service to customers across the nation, according to executives close to the plan.
Verizon is the latest and largest player to offer the technology, which divides voice calls into packets of data and sends them over high-speed Internet lines.
The service can be significantly cheaper than traditional phone calls because sellers of the service do not typically have to pay access charges and other fees related to telephone transmission.
In the past year, the service has been introduced by several phone companies, including AT&T; Corp., some cable providers and start-up companies such as Vonage.
Most regional phone companies have been hesitant to offer Internet phone service because it undercuts their main business of connecting calls over copper wires. They have also argued - rightly, many analysts say - that Internet calls are inferior in quality and reliability to traditional phone calls.
Yet the phone companies are under pressure to enter the market because cable providers are starting to package that service with their high-speed data and video services. A company like Vonage, meanwhile, has captured more than 200,000 customers, many of whom have abandoned their traditional phone lines.
Verizon wants to use its size to grab a nationwide consumer audience, including the tens of millions of homes currently without the high-speed Internet connections needed to make the service work.
Two other regional companies, Qwest Communications International Inc. and SBC Communications Inc., have already introduced Internet phone plans, but they are focusing mainly on business customers.
Qwest has started marketing the service to consumers on a limited basis in Minneapolis and expects to sell it by the end of the year to consumers in the 14 states where it operates, said Silvia McLachlan, a Qwest spokeswoman.
Customers who sign up for Verizon's Internet phone service and also subscribe to its high-speed broadband, or DSL, service will pay $34.95 a month for unlimited local and long-distance calls within the United States. The cost of the broadband connection is separate. Customers who buy a high-speed connection from another provider will pay $39.95 for the phone service.
Verizon will offer $5 discounts for the first six months of service for customers who sign up by Oct. 31. By comparison, unlimited local and long-distance service over traditional lines costs $59.95.
The prices for Verizon's service are similar to those of AT&T;, Vonage and other providers.
Verizon hopes that by offering Internet calling, it will entice more customers to sign up for its broadband service, according to an executive.
Verizon and SBC Communications have both announced plans to build high-speed fiber optic networks that connect directly to consumers' homes over the next several years.
Internet calls traveling over those networks are expected to be more dependable than calls that travel primarily over the public Internet. But the phone companies have only started to build those fiber networks, which will cost billions of dollars.
For Verizon, Internet phone service represents as much a threat as an opportunity. Traditional voice service has been in decline for years as consumers shift to cell phones and spend more time communicating through e-mail.
Internet calling plans also are typically sold at a flat fee for unlimited calls, a model that runs counter to traditional phone services, which charge by the minute for long-distance calls. (Most phone companies, however, are starting to offer many kinds of unlimited calling plans.)
In offering their own Internet plans, analysts said, the regional phone companies are not necessarily expecting to expand their numbers of phone subscribers, but to stem the flow of dollars heading to competitors.
The regional phone companies' services "are reactionary because they are seeing success from other service providers, and they'd rather keep that revenue than let another provider capture it," said Teresa Mastrangelo, an analyst at RHK, a telecommunications consultant. "They face a lot of different pressures."
Those other providers include Time Warner Cable, Cablevision and other cable companies that have spent the past decade building their own fiber networks. Time Warner Cable, for instance, plans to make the service available to customers in all its markets by the end of the year.
In the evolving market, customers may be more likely to sign up for phone service with their cable providers because of the convenience of one-stop shopping.