AT&T slashes Net-phoning prices

AT&T has trimmed the price of its CallVantage broadband phone service from $40 to $35 a month, further evidence of an unrelenting Net-phoning price war.

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The price cuts were expected. When CallVantage debuted two months ago, AT&T's critics said the $40 price was too high to keep the service competitive.

Also, No. 1 Net-phoning provider Vonage recently reduced the price of its most popular plan from $35 to $30 a month. Meanwhile, newcomers like Primus Telecommunications are trying to turn heads with a $20-a-month offer. Analysts expect even more price spasms, as the industry leaders emerge and others fail.

The market these companies all compete in is selling VoIP (voice over Internet Protocol), a technology that enables phone calls to travel over the unregulated Internet. By avoiding the local telephone companies' heavily taxed networks, VoIP calls are usually much cheaper than traditionally dialed calls.

There are about 600,000 broadband-connected households now using VoIP. Analysts project that the million-subscriber mark will be breached later this year and that there will be tens of millions of VoIP households by the decade's end.

"This is a new market, so pricing for it is not an exact science," an AT&T representative said.