Dramatic Increase In Consumer VoIP Projected

The number of U.S. households subscribing to Internet telephony services is expected to rise dramatically by 2010, as consumers flock to the cheaper service, a market researcher said Tuesday.

Fully 20.4 million U.S. households are expected to subscribe to a voice over Internet protocol-based broadband service by 2010, compared with 1.2 million in 2004, JupiterResearch said.

"The single biggest reason as to why someone would cancel traditional phone service in favor of VoIP is price," JupiterResearch analyst Joe Laszlo said. "It's definitely a value-based service."

In addition, as broadband use has grown, so has marketing by cable operators and independent providers, such as Vonage and Packet8. As a result, people are more aware of the cost savings, and the features that come with VoIP at no extra charge, such as call waiting, call forward, caller ID and more.

In the future, telephone companies are positioned to loose the most revenue from VoIP services. For now, however, they're fighting the competition by offering bundles of services, such as phone service, broadband and long distance, at reduced prices than buying the services separately, Laszlo said.As the popularity of VoIP increases, however, telephone companies are sure to change their strategies, and could start offering Internet telephony themselves, Laszlo said.