MCI Launches Internet Phone Trial as VoIP Grows

MCI has launched a test of a consumer-focused voice over Internet Protocol (VoIP) service, in a move that has puzzled some analysts because of the company’s pending merger with Verizon.

MCI,which Verizon is in the process of buying for US$8.6 billion, has launched a test with about 5,000 customers of a service called Neighborhood Broadband calling.

The service is being offered to existing MCI residential customers for $29.99 per month for unlimited calling and $19.99 monthly for 500 minutes worth of Internet-based calls, prices that are similar to many other such plans.

Verizon Already in VoIP

MCI is not a complete stranger to VoIP, having launched a business-focused service of the broadband-based calling service in Europe a year ago.

The move is far from surprising in the sense that virtually all major telecommunications companies of all stripes are now moving into the VoIP space, where startups such as Vonage and Skype have built small but strong customers bases.

Verizon already offers its own VoIP service, known as VoiceWing, a move similarly meant to stop wire-line customers from defecting to firms offering the lower-price benefits of VoIP.

Surprising Move?

The move took some by surprise because MCI, like rival AT&T, had announced a year ago that it would cease attempting to attract new residential long-distance business, choosing to focus instead on business customers.

That focus is what made MCI such an attractive merger partner, one that Verizon and Qwest fought viciously over for weeks before Qwest finally dropped out of the bidding. AT&T, which already offers a VoIP plan of its own, is also being acquired in a $16 billion deal by SBC Communications as the long-term trend of telecom consolidation continues.

TMCNet VoIP columnist Johanne Torres said the move was puzzling because of the timing, heading into the expected late second- or early third-quarter closing of the Verizon acquisition.

“Why would MCI launch a VoIP-based calling service after the company announced it would drop consumer-oriented products and services?” Torres wrote about the move. “Additionally, why would MCI proceed with VoIP plans for the consumer market if Verizon — soon to be MCI’s parent company — already offers VoiceWing?”

Preventative Maintenance

The answer might be that MCI is hoping to use VoIP to keep more residential customers from leaving, said telecom analyst Jeff Kagan, an especially important consideration as startup VoIP firms begin to gain more legitimacy and market clout.

“VoIP is fast becoming a service that people expect their telecom carrier to offer,” Kagan told the E-Commerce Times. “Given the number of product roll-outs we’ve seen, it’s rare that a company doesn’t offer some version of the service. It’s seen as a necessary part of the broader calling menu now.”

Kagan also noted that despite the fact that a few million Americans might already be dabbling in VoIP use, the market is still very much wide open. Any customers MCI picks up with the service will benefit Verizon, offering customers they can sell a wider bundle of services, from high-speed Web access to cable-style TV service.