Cable TV Operators' VoIP Threatens Bells; Huge Potential Market; Business for residential voice service is almost twice the size of pay TV.(INTERNET & TECHNOLOGY)

Byline: REINHARDT KRAUSE

Emerging Internet phone services could cost local phone companies $5 billion to $7.4 billion in annual revenue by 2008, say recent, separate reports from two credit rating agencies and brokerage firm Sanford C. Bernstein.

Voice over Internet protocol, or VoIP, gives users a new option for getting phone service. Instead of the normal circuit-switch method, calls come via broadband phone or cable lines, using the Internet method of sending data, or voice, in packets.

Startups such as privately held Vonage sell VoIP services that work over either speedy Internet-ready phone lines or cable lines. The VoIP leader, Vonage has signed up more than 155,000 customers. AT&T and other carriers also are offering VoIP.

But the biggest long-term threat to local Bell revenue will come from cable TV system operators that offer VoIP as well …