America Online Inc. today plans to offer local and long-distance phone service via the Internet in Washington and 43 other cities, the latest entry in an increasingly crowded market that includes the major cable and telecommunications companies.
AOL's new product is designed to work like regular phone service except that calls are routed over high-speed Internet connections. Setting up the service requires users to have AOL software on their computers.
Dulles-based AOL is entering a market that is still young and unfamiliar to many telephone users. One of the larger players, Vonage Holdings Corp., has just 500,000 subscribers, but competition is heating up as cable companies such as Comcast Corp. and telephone companies such as Verizon Communications Inc. develop services.
"AOL getting into this business is a very big thing," said Joseph Laszlo, a senior analyst with Jupiter Research. "They bring a very strong brand and strong reputation for ease of use to the market."
Verizon has announced plans to offer a new, 500-minute-a-month call service via the Internet in Washington for $19.95, or unlimited local and long-distance calling for $29.95. Verizon is calling its new service VoiceWing.
America Online's offering, called AOL Internet Phone Service, will cost new subscribers to America Online $29.99 per month for six months of unlimited local and long-distance calling and will include the America Online e-mail service. That price will rise to $39.99 after the trial period ends. Existing AOL subscribers will be charged an introductory rate of $24.99 a month for unlimited calling for the first three months and $29.99 afterward. Users also must pay for a high-speed Internet connection.
Comcast, the nation's biggest cable operator and the dominant company in the Washington area, said at the National Cable Television Association convention in San Francisco this week that it will introduce a discount phone service, called Digital Voice, to half of its subscribers this year and to all of them by the end of next year. It projects that 20 percent of its subscribers will add the new service.
Comcast plans to charge $39.95 a month for unlimited local and long-distance calls.
Most of the new phone services will not work if electrical power goes out or if high-speed Internet connections go down. And yesterday, Montgomery County officials said some Internet phone providers do not provide full 911 emergency call service that alerts dispatchers to a caller's location.
"Being able to identify the location of a person making a 911 call is vital, especially if the caller cannot or does not know their location," Steve Souder, director of emergency communications in Montgomery County, said in a prepared statement.
Some Internet phone services route emergency calls to administrators rather than directly to 911 operators. AOL's service puts calls through directly to emergency services and enables the communications center to identify the callers' locations. But that won't necessarily work, AOL officials said, if the caller loads the America Online phone service on a different computer in a different location.
America Online officials said they are planning to team up with the National Emergency Number Association to educate consumers about the risks of 911 calls through Internet phone services.
Yesterday, AOL Vice President James E. Tobin said the firm's new phone offering will be evaluated after several months before the company decides whether to introduce it nationwide. He said that initially, the service would be promoted on the Web. He also said heavy emphasis has been placed on training teams of call center experts to provide 24-hour online and telephone support to new users.
"If you offer this to the mainstream consumer, you better have excellent customer care so they can trust it," he said.
Staff writer Frank Ahrens contributed to this report from San Francisco.