AT&T STEALS SHOW WITH VoIP LAUNCH

Voice over IP took official ownership of the future last week when AT&T launched a new residential service at Spring VON in Santa Clara, Calif. Level 3 Communications gave further validation to the technology by announcing its own residential wholesale VoIP initiative.

AT&T's new broadband local phone service, called CallVantage, was launched in SBC's backyard cities of Austin, Dallas, Fort Worth and Houston, Texas. AT&T also launched service in parts of New Jersey. The carrier said it would expand the service to 100 major markets by the end of the year and expects to have 1 million customers by the end of 2005.

AT&T Chairman and CEO David Dorman told analysts last week that VoIP may be the killer app that the industry has been looking for. The company's launch created an immediate buzz in the market. It also prompted a lawsuit by upstart VoIP provider Vonage, which claimed the name CallVantage is too close to its own brand name.

CallVantage will provide unlimited calling and advanced telephony features for $39.99 per month. Early adopters who sign up for VoIP service by the end of May will get AT&T's six-month introductory offer of $19.99 per month.

In addition to traditional calling features such as call waiting, three-way calling and call forwarding — which AT&T will provide free of charge — the company will offer features such as Call Logs, which track calls and use a click-to-dial feature; Do Not Disturb, which lets customers block calls while allowing emergency calls through; Personal Conferencing for up to 10 callers; Locate Me, which rotates to up to five devices or rings them all at once; and Voicemail with eFeatures, which allows customers to hear their messages from any phone or PC.

“Our goal is to simplify people's busy lives by giving them convenience and control,” said Cathy Martine, senior VP of Internet telephony and consumer product marketing at AT&T.

Other Tier 1 service providers have launched VoIP service for the enterprise market, but the focus on consumers could dramatically affect the competitive dynamics of the marketplace. It also validates the technology.

“Voice over IP is our foundation for the future,” Martine said.

Two years ago at the same conference, AT&T CTO and CIO Hossein Eslambolchi said that VoIP had the potential to be disruptive, but was too immature to deploy on a large scale.

“It's like minor league vs. major league, and in VoIP we are still in the minor leagues,” Eslambolchi said at the time. Last week, Martine said more mature standards and technology made the infrastructure ready for prime time.

AT&T's official entry into residential VoIP comes a week after the carrier announced the accelerated expansion of its business VoIP portfolio, including the commitment to develop IP Centrex, call center and teleworker application.

Jeff Pulver, CEO of pulver.com and host of VON, called the announcement and others like it from Level 3 and Covad a tipping point for the industry. “It doesn't mean we are out of the early adopter phase of the technology, but it is important that the big boys have announced their intent to play,” Pulver said.

Level 3 Communications launched two wholesale residential voice-over-IP services that it expects to offer in more than 300 markets by year's end. VoIP Enhanced Local Service (ELS) will target cable operators, enhanced service providers, ISPs and interexchange carriers looking to offer residential local and long-distance VoIP services over broadband and that operate their own switching environment.

The company also will offer HomeTone service, which is more of a turnkey solution that allows new entrants into the market through a hosted offering that includes a softswitch and back-office environment. HomeTone also adds calling features plus unified messaging and a personal locator service on top of the enhanced local service.

Level 3's goal is to provide its carrier customers with local service building blocks such as interconnection with local and long-distance carriers, signaling services, telephone numbers, billing, local number portability and E-911 emergency services. It also will offer operator assistance and directory services.

“This allows other players to get in the market and do what they're good at — like marketing — without having to do it all,” said Ronald Vidal, group vice president of emerging technologies at Level 3. “This may ultimately be a service that goes where the strongest brands are.”

Given that AT&T launched a $200 million advertising campaign earlier this year to boost brand awareness and its identity as more than just a phone company, Vidal could be right.

Other brands may be forced to replicate the effort as they fight for recognition in what could become a crowded marketplace. “That's a great thing. If no one else was getting into the market, you'd think you were shooting in the wrong direction,” said Kevin Gavin, chief marketing officer of GoBeam.

GoBeam will be part of its own national VoIP play when its acquisition by Covad is complete in May.

Another carrier that announced three new VoIP offerings at VON questioned Level 3's turnkey solutions, saying that any provider of scale would be operating their own switching environment. “It is a good example of the rising tide,” said Anthony Christie, chief marketing officer at Global Crossing.

Some vendors are already benefiting from that tide. Sylantro announced last week that Broadvox has deployed its software-based, hosted VoIP platform for its residential VoIP rollout last month in three Midwest cities.

“The residential market will fuel the business market,” said David Illing, senior vice president of marketing and sales at Sylantro. “The big companies jumping in validate all of our efforts.'”

Not everyone thinks the timing for large carriers' residential VoIP strategy is on target. “What happens when consumers sign up and expect to get AT&T quality?” said one VON conference attendee. “Vonage is an upstart, and people are trained to expect a little less.”

Some vendors already think they have the answer. “I believe it will be quality of service that differentiates companies like AT&T, Level 3 and Vonage,” said Paul Capozzoli, business development manager for Agilent, which last week launched a tool for assuring service quality across VoIP networks and the PSTN.

In fact, proving quality in the consumer space is part of AT&T's strategy for driving VoIP into the enterprise space. “We believe this is like instant messaging,” Martine said. “It can actually grow from a consumer POV and move up through the value chain to business. Before, CIOs were somewhat fearful that their investment would not be [returned]. They don't want to put their career on the line for a technology that's not proven.”

However, regulators are lurking in the shadows with the potential to derail VoIP. Robert Pepper, chief of policy development at the FCC, perhaps threw a dash of reality at VON attendees by noting that issues such as universal service can't be ignored.

“What we need now is to separate economic regulation and social policy,” he said.

Pulver, who as founder of Free World Dialup recently petitioned the FCC for declaratory rulings on VoIP, said, “The FCC clearly understands the issues [around] VoIP.” Unfortunately, the House and the Senate don't.

Quoting a senator who reached out to him for some of that understanding during recent hearings, Pulver said, “Political decision must be based on knowledge, and not on sheer lobbying muscle.”