Baby Bell Heavyweight Jumps Into the VoIP Ring

SBC, the country's second largest telephone company, expects IP telephony to become its customers' "preferred" service and accelerates it's residential service announcement as a result of a recent FCC ruling beneficial to VoIP providers.

SBC has announced it will start rolling out VoIP service to residential customers “early next year” and the company expects analog phone users to convert to digital telephone service in large numbers as it adds fiber to the home, a project that is expected to take two to three years.

According to a company spokesman, SBC unveiled its residential VoIP offering earlier than anticipated as a result of a recent FCC ruling barring state regulation of IP telephony services.

“Consumers will be able to choose between traditional and traditional plus next-generation voice services from SBC companies,” said Randall Stephenson, SBC chief operating officer, in a prepared statement. “Over time, we expect that VoIP will be a preferred voice service because of the features and benefits this technology enables.”

Mike Reddout, SBC vice president for IP telephony said that he expects analog customers to change to VoIP “over time. That’s why we’re doing [a trial]. We want to have the knowledge and the products to offer residential service. IP is the future. It will be more than just voice, though that is a critical component.”

SBC, the second largest “Baby Bell,” behind Verizon, has been conducting a trial with hundreds of residential customers in Los Angeles, Dallas, Chicago and San Antonio over the past month.

While this will be SBC’s first foray into the residential VoIP space, the company has been in the business IP telephony market for nearly a year.

The company’s growth in the residential market will be largely determined by the success of its two-to-three year fiber-to-the home buildout that will offer 6 mbps or more for each of an estimated 18 million homes. The fiber buildout will begin in the fourth quarter of next year.

The SBC service will use IP technology and a broadband connection to deliver voice calling and enhanced features, such as a Web-based portal and advanced call-management capabilities, such as “follow me” that make it easier for customers to manage their communications. Other features will be announced when the VoIP service debuts sometime in the first quarter of 2005.

SBC offers DSL broadband service to its customers, with about 4.7 million DSL lines and 50 million analog lines. The VoIP offering will be available to customers with DSL or (another provider’s) cable broadband access, according to Reddout.

In effect, allowing non-SBC DSL customers to sign up for the VoIP service potentially increases the company’s telephone footprint to anywhere in the world where broadband internet access is available. This could mean that, for the first time, SBC will be competing for customers with other Baby Bells in regions it does not currently serve.

Pricing will be announced when the service actually launches, though the company said the prices “will be competitive” with other VoIP providers. SBC DSL customers, Reddout said, “could” get preferential pricing, meaning they would pay less than cable customers.

Many VoIP providers dropped their prices about a month ago, cutting from $5 to $10 off the monthly fees for customers. Some current service offerings allow unlimited calling throughout the US and Canada for as little as $20 per month.

The recent residential VoIP price drops didn’t affect SBC’s entry into the market, according to Susan McCain, a company spokeswoman.

In its press release, SBC announced that the FCC’s recent ruling making VoIP an interstate service and keeping authority over the promising new technology in order to eliminate the possibility of a patchwork of state-by-state regulations is prompting the company and other providers to offer VoIP.

Though the SBC offering was already in the works, the FCC decision prompted the company to announce its trial and planned rollout earlier than it might have otherwise, Reddout said.

"The FCC is moving to create an environment that promotes investment and innovation in IP services," Stephenson said. "It is important that federal, state and local authorities keep the road clear so that this technology can reach consumers faster. The fact that we are accelerating our investment to bring new technologies to the market more quickly shows how good policies can deliver good results to consumers."

As more companies get involved in the market, the higher the chances of an industry shakeout via mergers, acquisitions or outright failures. “I would be surprised to see more pure play VoIP providers enter the market,” Reddout said. “There could be some consolidation.”

Brooke Schulz, spokeswoman for Vonage, said the company “welcomes the competition, adding that it was too early to determine what impact SBC would have on the market, particularly because the company’s pricing plan has yet to be unveiled.

In much of its market, SBC will be competing for customers with Comcast, which will launch its own VoIP service in 2005.