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Verizon Makes the Leap to VoIP

By Stephen H. Wildstrom The fight over residential phone service is about to get a lot more intense. Using voice over Internet protocol (VoIP) technology, competitors including long-distance carriers such as AT&T (T), cable operators such as Comcast (CMCSA), and startups such as Vonage are sending voice service over broadband connections.

So far, however, the four regional phone companies have stayed out of the fray, observing an unspoken truce not to invade each others' territories with VoIP. That will come to an end within a few weeks, when Verizon Communications (VZ) announces it's rolling out competitive VoIP services.

"We're not going to sit back and watch," Verizon CEO Ivan Seidenberg told an industry conference on June 7. Speaking at The Wall Street Journal's D2: All Things Digital conference in Carlsbad, Calif., Seidenberg said: "We have a national market. We're not restricted out of our service area."

iTUNES TRAVELS. VoIP has the potential to tremendously disrupt the telecommunications industry in general, and regional phone companies such as Verizon, SBC Communications (SBC), BellSouth (BLS), and Qwest (Q) in particular. In the worst case, the technology could reduce them to providing a commodity service -- raw bandwidth -- while new entrants get the profits from value-added services. Residential VoIP service typically costs at least 25% less than traditional phone service. Part of that is due to tax and regulatory savings, but much is the result of significantly more efficient utilization of the network.

In another major announcement at the conference, Apple Computer (AAPL) CEO Steve Jobs said Apple will ship a $129 device that will allow music stored on a Macintosh or Windows PC to be played wirelessly on a home stereo system. The Airport Express, which will ship in July, will also function as a Wi-Fi access point or a "repeater" to extend the range of an existing Wi-Fi network.

The Airport Express does have one major disadvantage: You have to select the music to be played using iTunes software on the Mac or PC, not at the stereo. But Jobs suggested that a remote control to avoid the problem may be forthcoming in a future version. Wildstrom is Technology & You columnist for BusinessWeek

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