AOL Debuts Internet Phone Service

America Online customers in 40 select cities have "Got VoIP!" Thursday, as AOL began to roll out the beginnings of what will become a nationwide voice over IP phone service called AOL Internet Phone Service.

AOL Internet Phone Service melds together reduced cost local and long distance calls and standard calling features with AOL's repertoire of voice, e-mail and instant messaging services at no additional charge. AOL also vows to offer customers a "warm blanket of customer care" to soften the migration away from incumbent providers.

The main differentiator is that the service offers AOL subscribers the familiar Call Waiting, Caller ID and Voicemail and Quick Codes capabilities that they have become accustomed from their telephone company, but over a broadband Internet connection with the added advantages of online communications.

Customers who register for the service receive a self-installed Welcome Kit, which includes an adapter that plugs ordinary telephones into cable or DSL modems - eliminating the need for specialized equipment.

Dashing Ahead into VoIP

To make its service value-added, AOL has developed call management features known as "Dashboard," an assortment of voice services to provide what AOL calls "practical convenience," and provides full enhanced E-911 as well as parental controls to supervise children's use of the service.

Dashboard centralizes account settings, call handling and call forwarding preferences, AOL Instant Messenger (AIM) presence awareness options for phone contacts, and other settings including call logging and Address Book functionality.

There are some visible changes to the Address Book. A "click to dial" button will appear on contact lists next to each telephone contact and aliases personalize the designation given to contacts beyond the available Caller ID information. Given this ability, many phone lines can interact with the same call alert. For example, an incoming work telephone number may not show up as "Daffy Duck," but aliasing would pull the number under the contact.

The client software stores voicemail messages in the local inbox and notified users of new voicemail with a "You've got voicemail" alert. Voicemails parse to different inboxes per Screen Name.

AOL also bundles AOL Call Alert, AOLbyPhone and AOL Voicemail which are used to manage and retrieve voicemail and e-mail messages from any touchtone phone or computer with Internet access. The voicemail service is PIN protected and accepts voice commands for added hands-free convenience. The same voice technology makes it possible for AOL to read back e-mail messages over the phone.

Users with these voice services can choose to answer incoming calls either by their home telephone, mobile phone or their personal computer, depending on their preference. AOL refers to this feature as "forwarding on the fly."

AOL has also thrown in the incentive of 24/7 customer support and unlimited "411" directory lookups.

The Timing is Right

IP telephony, better known as VoIP, has economized both local and long distance calling with cut-rate prices, eroding the core revenue of traditional telephone companies.

Yankee Group, a global communications and networking research and consulting firm, forecasts that the VoIP market will nearly triple its subscriber base in 2005 with 2.8 million customers largely in the enterprise. By 2008 that number may swell to 17.5 million provided home users accept IP telephony as a substitute.

Alternative voice players were first-to-market as early as 2002, but VoIP has yet to be accepted as a substitute by the residential market. According to AOL's own estimates, 4 percent of VoIP customers are early adopters; AOL is going for the other 96 percent.

AOL vice president of Voice Strategy James Tobin told BetaNews that the timing was right for a mass market proposition. Tobin feels that AOL has scale advantages versus other ISPs, is able to communicate that "it's normal," and above all: make VoIP easy.

Tobin said that AOL has made a long term investment into the service that will extend brand trust into telephony and raise consumer awareness of VoIP. He specifically highlighted call quality that AOL says will be consistently high.

In a conversation with BetaNews, Tobin said that current VoIP technologies are analogous to early dialup modems that required customer to write scripts. To that end, AOL has partnered with hardware manufacturers to simplify the hardware end of the equation.

The Welcome Kits provide custom hardware from Sonus Networks that AOL says will take customers an average of 15 minutes or less to install. AOL claims to have benchmarked its install kit to be better than other providers through comparative testing.

AOL is also partnering with Linksys and NETGEAR to develop intuitive home networking solutions. Customers who encounter difficultly during installation can call AOL support, or, for an added cost, schedule a technician to visit their home.

New System, New Concerns

BetaNews asked Tobin about whether VoIP would bring added Internet attacks from malicious users. But Tobin dismissed concerns that Internet telephony is more vulnerable than the PSTN networks, saying that AOL will work constantly on security and draw on its accumulated experience as an ISP.

AOL faces the potential of SPIT, otherwise known as spam over IP telephony that is being eyed as a potential gadfly for the emerging VoIP market.

In another security matter, AOL has also opted away from the vanity number concept to provide more reliable E-911. VoIP providers have been criticized for failing to address E-911's shortcomings.

Roughly Half as Much as Regular Phone Service

AOL is offering tiered pricing: local, unlimited and global. Local calling costs $18.99 USD per month not including long distance charges; Unlimited calling plans costs $29.99 USD per month for one flat rate in the US and Canada; and a global calling plan costs $34.99 USD per month.

AOL is offering introductory rates for new members and service discounts for the first three months of services for its current subscribers. "With AOL you buy only what you want," Tobin told BetaNews. "These prices cut monthly telephone bills in half."

Availability is limited to 40 U.S. cities. Additional locales will be added throughout 2005.