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Tue, Jun 15, 2004 - Page 12 News List

Survey sees Internet-based telephony making inroads

NY TIMES NEWS SERVICE , NEW YORK

As many as 30 percent of homes in the US and Britain could subscribe to Internet-based phone services in the next three years if major telecommunications companies offer services similar in price and quality to traditional phone connections, according to a new survey by Mercer Management Consulting.

The findings, based on a poll of 1,000 consumers in the two countries that was to be released yesterday, suggest that the market for low-priced Internet phone services will most likely be dominated by phone companies like AT&T and cable providers, and possibly local phone carriers, but not the new entrants that control much of the Internet market now.

"The companies with existing relationships with consumers have huge advantages," said Martin Kon, a consultant at Mercer and the author of the survey. "It's an uphill battle for the upstarts with no customer base."

While Internet calling, which sends voice calls as data packets over the Internet, is considerably cheaper than traditional calling, most consumers will not switch solely because of price, Kon said.

Reception and service, he noted, would have to be comparable to what conventional connections offer.

"People won't accept lower quality," Kon said. "I don't think Vonage or Skype," two young ventures that offer Internet calling, "will eat their lunch."

"Love them or hate them," he said, "the local phone companies are perceived as having better quality."

With nearly 200,000 subscribers, Vonage, which is based in Edison, New Jersey, is the market leader for Internet calling services by a wide margin. But its share of the market has started to slip since AT&T introduced its Internet phone service, called CallVantage, in March.

Cable companies including Cablevision, Time Warner Cable and Cox have also entered the Internet phone market, and other telecommunications companies are preparing services as well. Vonage has worked to shake the perception that its service is only for technophiles and is unreliable and difficult to use.

Consumers can use the service without having to install software on computers or buying special phones. The company sells the adaptors needed to access its service in 5,000 retail outlets.

According to IDC, a market research firm, nearly 600,000 consumers in the US are expected to subscribe to Internet calling services by the end of the year.

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