August 30, 2004 10:19 AM PDT

VoIP picks up momentum

The number of U.S. Internet telephony subscribers is expected to grow to 1 million by the end of this year from 131,000 in 2003, according to a new study.

That number is expected to surge to 17.5 million households by 2008, according to the study, released Monday by The Yankee Group.

After years of uncertainty and regulatory hiccups, many telephony companies are readying voice over Internet Protocol (VoIP) technology, the research firm said. AT&T, Verizon Communications and Qwest Communications are planning to launch local VoIP services later this year. Those companies are looking to move in on the success of VoIP provider Vonage.

"These companies have the potential to capitalize on the market's momentum," Kate Griffin, senior analyst at The Yankee Group, said in a statement. "Operators that brave the uncertainty and enter the VoIP market will gain the ability to define the service and set consumer expectations."

The market researcher said cable multiservice operators will corner 56 percent of the local VoIP market by the end of next year, while share for those in the "alternative voice provider" category will drop from 66 percent in 2003 to 19 percent in 2005. Cable's push into VoIP will help it grab nearly 10 percent of the local telephony market by 2008.

Internet telephony has been fast gaining ground, because it is cheaper for both home customers and businesses. VoIP calls are placed over Internet, which free it from the government regulations and heavy taxes to which traditional telephone networks are subject.

 

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