Verizon to go VoIP

FRAMINGHAM (11/21/2003) - Verizon Communications Inc. plans to unveil residential VoIP service next year. In the first phase of a two-phase rollout, Verizon will turn up a "non-QoS" VoIP service for consumer DSL customers in the second quarter of 2004, the company says. The second phase will be a managed service offering over DSL and T-1 access lines for residences and enterprises in the fourth quarter of 2004.

"We will meet or beat any competitive offering," Verizon Vice Chairman and President Larry Babbio told investors at the UBS Warburg Global Communications conference in New York this week. "We're excited about the plan and the potential for our wireline business."

Analysts believe Verizon's VoIP services are intended to defend its turf against cable companies offering voice, and are an alternative effort to retain customers vs. primary access lines.

"The company is feeling the threat from cable and access-agnostic operators today and is taking an aggressive approach to retain the customers," says John Hodulik, an analyst at UBS Warburg. "We believe the VoIP service will be introduced as an alternative secondary line in the residential segment. This could accelerate the cannibalization of the primary-line revenues; however, the company would still retain the customer."

Some RBOCs, like SBC, fear that VoIP would present a threat to their ability to retain access line revenue by offering consumers yet another technology substitution alternative to the traditional POTS line into their homes. They usually finger wireless as the bigger threat to access line revenue, however, as well as UNE-P mandated wholesaling of access lines to competitors.

Days after SBC acknowledged the threat that VoIP poses, the carrier unveiled a nationwide managed VoIP service for small and medium-sized businesses called PremierSERV Hosted IP Communications Service. SBC says it will manage whatever access line cannibalization occurs from VoIP.

"We realized and have planned for this," says Ron Comerford, associate director for product and offer planning, SBC business marketing. "SBC is being proactive in offering our VoIP Hosted IP Communication Service. If we don't provide this technology to our customers today, then our competition will."

Qwest Communications International Inc. this week also announced that it plans on delivering VoIP services using gear from Lucent Technologies Inc., and earlier this month announced plans to offer VoIP services in Minnesota. BellSouth Corp., meanwhile, recently announced a VoIP service for the small-business market.

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