Leaping Into the VOIP
By Adam Lashinsky

(FORTUNE Magazine) – "Voice over Internet protocol" uses the Internet to replace ordinary phone service. Virtually any Net connection--cable modem, DSL, dial-up--can be turned into a phone line. Usage is tiny now, but VOIP promises to revolutionize calling. That has everyone from startups to cable guys drooling over the billions telcos collect for phone service. Here's a breakdown of some of the players and what they're doing. --Adam Lashinsky

Cable companies

Time Warner Cable Stamford, Conn. This subsidiary of Time Warner (parent of FORTUNE's publisher) launched VOIP service in Maine in 2003 and is planning a nationwide rollout this year. It's rumored to be an IPO candidate as a way for parent Time Warner to buy out 18% investor Comcast.

Cox Communications Atlanta Cox offers VOIP in one cable market, Roanoke, Va. The company also provides digital phone service--including traditional circuit-switching technology--in other markets, where it pays phone companies to carry some calls. Cox customers pay between $9.99 and $15.89 a month for their first line.

Cablevision Systems Bethpage, N.Y. Cablevision offers "Optimum Voice" VOIP service to high-speed Internet customers for unlimited calling in the U.S. and Canada at $34.95 a month. Its target market will initially include its one million--plus cable-modem customers; the product launched in September 2003.


AT&T Bedminster, N.J. Ma Bell is starting small. It announced plans late last year for business and residential VOIP services in major cities in 2004, with rollout in "select metropolitan markets" during the first quarter. VOIP is seen as a defensive move. No specifics have been released. VOIP is unlikely to have a big near-term impact on the stock.

Verizon New York City The country's largest telco says it plans to build the nation's biggest "converged network," which includes VOIP. It made a splash with a five-year deal to buy equipment from Nortel. It intends to begin offering DSL customers VOIP equipment and service during the second quarter. No prices have been announced.

Pure plays

Net2Phone Newark A VOIP pioneer, it's currently focused on selling wholesale VOIP service to cable companies (although it generates its revenues by selling mundane phone cards at convenience stores and such). At one point during the bubble it traded at over $90. It now trades at $8, up from $3 in April 2003.

Vonage Edison, N.J. The biggest independent, Vonage offers national VOIP service. Monthly rates range from $15 to $35, and the company has signed up 97,000 customers. The service works with any cable modem or DSL connection. Founded by entrepreneur Jeffrey Citron, Vonage is a probable IPO by 2005.

8X8 Santa Clara, Calif. A former chip company, 8x8 began offering its "Packet8" VOIP service nationwide in 2002. For $19.95, plus a $29.95 activation fee, customers get unlimited local and long-distance calling in the U.S. and Canada. Though the company had fewer than 10,000 customers by December, the stock has shot from 17 cents to $5 in a year.