Computer Business Online

15 November 2005

The number of US subscribers for Internet phone services surged to about 3.6 million in the third quarter as providers aggressively signed up customers.

According to research firm TeleGeography, revenue from Internet phone services jumped 38 percent, to $304 million. Subscriber numbers were up 33 per cent from 2.7 million subscribers at the end of June.

While the numbers are small relative to the 93.2 million residential phone lines TeleGeography estimates are served by traditional carriers, they do indicate a dramatic growth of Internet-enabled calling over the last year.

The top VoIP providers are Vonage Holdings Corp., Time Warner Inc.'s cable unit and Cablevision Systems Corp.

VoIP subscribers grew even faster than expected during the third quarter, partly because of "the impressive performance of Time Warner Cable, which was the fastest growing cable VoIP provider in each of the last three quarters," the report said.

Telegeography predicts traditional carriers will see local phone revenue shrink by $4.8 billion and long-distance revenue by $1.8 billion by 2010 because of VOIP competition. The firm estimates that VoIP users have risen about 400 per cent from 714,000 in the third quarter of 2004, while revenue soared 473 percent from $53 million.

"The threat to traditional phone companies is substantial," said Stephan A. Beckert, director of research for TeleGeography, adding that main competitive driver for VoIP remains price. Even the most expensive VoIP services still charge less than traditional phone companies.