Internet Phone Calls Could Squeeze Prices; AT&T, others embrace the technology, despite its deflationary impact.(A)

Byline: REINHARDT KRAUSE

The race to roll out Internet phone services will likely worsen price deflation in an already reeling telecom industry.

AT&T Corp. Thursday stepped up plans to offer local and long-distance phone calls via voice over Internet protocol, or VoIP, technology. Ma Bell says it'll offer VoIP services in some markets starting in the first quarter of next year.

AT&T announced its plans three days after losing a bid to take part in a VoIP product launch planned in 2004 by Time Warner Cable, industry sources say. Time Warner picked MCI and Sprint Corp. as partners instead.

AT&T joins a fast-growing crowd of VoIP service providers. They include cable TV firms, regional Bell phone companies and start-ups such as Vonage Holdings Corp.

Qwest Communications International Inc. rolled out a VoIP service in Minneapolis Wednesday.

Telecom firms plan to offer VoIP services via cable modems or phone companies' digital subscriber lines. These high-speed pipes provide speedy Internet access as well as extra bandwidth to transmit voice calls.

Company executives and observers expect VoIP to further drive down prices for local and long-distance phone services. Industry revenue has already plunged amid fierce price competition sparked by…