EarthLink Expands VoIP Offering

EarthLink said Thursday that it would expand its packaged DSL and phone service to eight additional markets in an effort to give consumers an alternative to local phone companies. First announced in January, the service is made possible through a partnership with Covad.

Where EarthLink's service differs is at the phone company's central office. Until the phone call reaches that point, it acts as a POTS, or "plain old telephone service." This means users can place a call using their standard phoneline.

After that, the call is routed through equipment from partner Covad. It then traverses the Internet through Covad's network before it is passed off to EarthLink's to ensure quality.

This change provides key differences. Unlike traditional VoIP, EarthLink's service operates during a power outage, and the calls are routed over EarthLink and Covad's managed networks, rather than the public Internet. From there on, the two services are pretty similar, offering E-911 and custom calling features.

$50 million in funding has been provided to finance a build out of the network to Atlanta, Chicago, Los Angeles, Miami, New York City, Philadelphia, San Diego, and Washington, D.C. This would expand the list of supported cities to 12 -- Dallas, TX; San Francisco and San Jose, CA; and Seattle, WA already are able to receive the service.

Covad has agreed to repay EarthLink for its investment through $10 million stock and $40 million in convertible debt, due in 2011.

"With our Internet voice initiatives, we are reshaping our position in the marketplace and redefining what it means to be an ISP," said Garry Betty, EarthLink's president and CEO.