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Story URL: http://www.silicon.com/research/specialreports/voip/0,3800004463,39129363,00.htm

AOL debuts VoIP phone service
Talk is cheap...

By Jim Hu

Published: Thursday 07 April 2005

America Online has said it will launch its new net phone service in more than 40 cities, offering prices as low as $13.99 per month as part of an aggressive rollout.

AOL revealed last month that it was on the verge of launching phone service based on VoIP, over voice over Internet Protocol. The service by the world's largest internet access company will be similar to that of Vonage and several other companies, which use a customer's broadband internet connection to send and receive telephone calls.

AOL, a division of Time Warner, said it would offer three pricing plans for its AOL Internet Phone Service to current AOL subscribers, from $13.99 for a local calling plan up to $29.99 for unlimited North American calling and low international rates. The prices increase by $5 after three months.

For nonmembers, AOL will sell the phone service and its online service for $29.99 for the first six months. The package will jump to $39.99 thereafter. AOL's standalone service for broadband internet users costs $14.95 per month.

AOL's move into VoIP highlights the once-battered company's efforts to sell more subscription products on top of its popular online service. For the past three years, AOL has hemorrhaged more than 4 million dial-up subscribers, most of them leaving for broadband services offered by cable and phone companies. The company has tried to migrate its customers to AOL for Broadband, which costs less than the $23.90 it charges for dial-up.

AOL has also tried selling other subscription-only products that work with its online service.

Vonage, the VoIP service provider with more than 500,000 subscribers, offers unlimited calling for $25 in the US and starting at £9.99 in the UK. Some smaller providers offer unlimited calls for less than $20 per month.

Jim Hu writes for CNET News.com. Reuters contributed to this report.