EarthLink (NASDAQ:ELNK) is the latest company to bridge the Internet and the telephone. It's offering voice over Internet protocol (or VoIP) service for free to its customers, as it announced in a press release today. While that's fine and good, whether its subscribers will find much usefulness in the service is another matter.
Companies like AT&T (NYSE:T) and Vonage, among many others, have been trumpeting VoIP to the consumer market. AT&T's efforts to ditch wilting long-distance service and position itself to excel in Internet calling have been pronounced; it recently began offering its CallVantage product in Best Buy (NYSE:BBY) retail stores.
EarthLink, like Time Warner's (NYSE:TWX) America Online unit, has been at risk to lose a lot as consumers switched to broadband and major telephone and cable companies began offering Internet services.
Of course, EarthLink is dishing it out, too, by getting into voice communications. It already offers voice, email, and Internet capabilities via Research In Motion's (NASDAQ:RIMM) BlackBerry device.
Back to VoIP, sure it's nice for EarthLink to be able to say that it's offering a state-of-the-art service for free. However, today's announcement isn't as interesting as one might think it is. It's true that VoIP is becoming more viable as new product offerings now look, feel, and operate like traditional telephones. But EarthLink's not delivering on that aspect.
The Wall Street Journal pointed out that in order to converse through their computers, EarthLink customers will have to be tricked out with accoutrements like headsets or microphones and speakers. They'll also have to dial through Internet addresses instead of phone numbers. Hmm, it doesn't sound too workable, considering EarthLink has always seemed to attract a demographic more similar to that of AOL or United Online (NASDAQ:UNTD), for whom low cost and ease of use are key elements.
According to WSJ, within a year EarthLink will offer a more conventional Internet telephone service, but of course, that will not be free.
Although EarthLink swung to a profit in July, it still had to ratchet down its estimates for customer sign-ups in 2004. Broadband adoption continues to be a problem -- judging by the major competition posed by the telecom and cable companies -- as dial-up becomes more and more obsolete. Although it is clear that EarthLink has to continue to broaden its product offerings beyond traditional Internet, today's announcement probably won't count for much more than lip service.
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Alyce Lomax does not own shares of any of the companies mentioned.
