Yahoo! To Offer Free Net Phone Service

Internet powerhouse Yahoo! (Nasdaq: YHOO) announced a free Internet telephone service Tuesday that will allow users to access e-mail, news and other information from remote locations.

The company also unveiled a joint venture with Net2Phone, Inc. (Nasdaq: NTOP) to provide a service that allows its customers to make free calls from personal computers to telephones.

Emerging Industry

Voice-recognition technology is viewed by analysts as an emerging, lucrative industry that will eventually be employed in high-tech communication devices ranging from PCs to cell phones to handheld, Internet-enabled appliances.

It is also a competitive offering, as Yahoo! and America Online (AOL) are racing one another and several high-profile startups to be the first company to deliver viable speech technology on a widespread, commercial scale.

“We believe consumers will benefit significantly from the integration of voice products and services enabled by Net2Phone throughout our network of properties,” said Yahoo! president and CEO Jeff Mallett.

Technology Still Flawed

Voice recognition technology is still in its infancy and plagued by flaws. Only a handful of companies currently offer it, such as TellMe Networks, which recently announced $125 million (US$) in funding, and BeVocal, Inc.

Yahoo’s new listening-based service is the first step toward a voice-recognition service, since users must punch phone buttons to access their e-mail and other information. At that point, a computer-generated voice reads their e-mail and other information.

Yahoo! officials said the company will not begin using voice-activation or speech recognition technology until it is bug-free. Though AOL does not offer such a service yet, the company recently acquired telephone voice portal Quack and also owns a stake in SpeechWorks, a company that specializes in voice technology.

‘Not About Cheap Phone Calls’

With the announcement of the partnership with Net2Phone, Yahoo! said it will use the company’s voice technology in its newest suite of voice services, including Yahoo! by Phone, the telephone access to e-mail, Yahoo! Mail, which offers free voice mail, and its free PC to phone calling for Yahoo! Messenger users.

“Voice over IP is not about cheap phone calls,” said Net2Phone CEO Howie Balter. “Our strategy is to deliver voice services to IP networks and change the way people interact with the Internet using voice.”

For the nine months ended April 30th, Net2phone’s total revenue was $47.5 million, up from $22.2 million. The company’s net loss totaled $37.3 million, up from $2.9 million.

Net2Phone’s stock price hit a new 52-week low Monday of 19.563, but jumped 12 percent with news of the Yahoo! announcement. As of early trading Tuesday, the stock was trading at 22.875.