You've Got ... A Phone Call?

America Online Inc. on Thursday launched its Internet telephone service in about 40 markets, jumping into a field that is already crowded with startups, cable operators and even traditional phone companies.

The technology, known as Voice over Internet Protocol, or VoIP, allows customers to make phone calls over broadband Internet connections, usually at much lower cost than traditional phone service.

Dozens of companies have entered the market in recent years, ranging from startups like Vonage Holdings Corp. to traditional telecom players like Verizon Communications Inc. Most major cable operators are also developing or rolling out services.

"AOL is a little late to the party," says CBSNews.com Technology Consultant Larry Magid. "Still, with the technology maturing, the name of the game is now marketing, something that AOL historically has been very good at."

AOL's starting price for new users is $29.99 per month for the first six months, and increasing to $39.99 after that. It includes unlimited local and long-distance calling within the U.S. and Canada as well as unlimited access to the regular AOL service over existing broadband.

Plans for current AOL users start at $13.99 a month (increasing to $18.99 after three months) for unlimited local and regional calling to $29.99 (increasing to $34.99) for a global calling plan with low international rates.

The price for new users is steeper than the current Internet telephone leader, Vonage, which charges $24.99 a month for unlimited U.S. and Canada dialing. Packet8, a similar service offered by 8x8 Inc., charges $19.95 for its "Freedom Unlimited" plan.

AOL, based in Dulles, Va., is apparently trying to differentiate itself by bundling its online service. It also claims to make it easier for consumers to manage their service from a Web-based "dashboard," which New Jersey-based Vonage also uses to describe its Web-interface. From there, users can change call-forwarding settings, view call logs and access contact lists that will dial a number simply by clicking on it.

Subscribers also will be able to see if someone is online to chat by instant message or by voice, the company said.

AOL also is trying to avert a criticism lodged at other Internet telephone companies by providing an enhanced 911 service that delivers a caller's address to dispatchers in case of an emergency.

"With millions of customers, AOL is in a pretty good position to market Internet phone service," says Magid. "The company needs to convince consumers that the Internet is just as good for placing phone calls as the old-fashioned phone networks, and that is the case, except that if the Internet or the electric goes down, so does the phone service."