Net telephony grows on Time Warner

Time Warner Cable plans to expand its Internet phone service into three or four more cities by year's end, Time Warner Chief Executive Richard Parsons said Wednesday.

And next year, the company plans a "more aggressive" implementation of voice services, Parsons said during a conference call with analysts to discuss the company's earnings. He did not provide specifics, such as what cities will be targeted.

The planned expansion of the voice over Internet Protocol ( VoIP) dialing plan would be the first

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since May, when Time Warner's cable division began selling a $40 a month VoIP dialing plan called "Digital Phone" in just one city, Portland, Maine.

"We've been aggressively testing it this fall and are pushing as hard as we can," Don Logan, chairman of Time Warner's Media and Communications division, said on the conference call.

Time Warner's decision to expand its Internet telephony service is another indication that cable providers are the United States' biggest VoIP proponents. By selling phone services, cable providers have a much coveted "triple play"--voice calls, high-speed Web service and cable TV. Cable's chief competitors are the major telephone companies, which for now sell voice calling and high-speed Web access. Most plan to add video in the future.

VoIP creates telephone service that relies on Internet connectivity rather than phone companies' proprietary networks. As a result, Net telephony providers are able to sell unlimited dialing plans at prices well below the rates most traditional telephone companies offer.

Net telephony requires a network connection and a PC with a speaker and a microphone to convert analog phone signals into the Internet Protocol format. Some Internet phone services use existing home or office phones. After years of hype, the technology is finally garnering serious consideration from business and consumers.

Combined with similar products from cable providers such as Comcast and Cablevision Systems, major local phone companies across the country--sometimes called RBOCs (regional Bell operating companies)--are close to seeing the collapse of the last barriers to local phone competition.