By Alyce Lomax (TMF Lomax)
August 24, 2004

Voice over Internet Protocol, or VoIP, may be about to zoom into homes everywhere. The next step closer to mainstream is the deal through which AT&T’s (NYSE: T) CallVantage VoIP service will be available through Best Buy (NYSE: BBY). VoIP is hot; traditional long distance is not.

Up until now, privately held Vonage was one of the best-known start-ups to offer VoIP to the first-mover market, though that phase seems poised to end. The possibilities in the space haven’t been lost on the heavyweights, and now mainstream consumer adoption will likely explode. In addition to AT&T, for example, Verizon (NYSE: VZ) offers its own VoIP package.

Yesterday’s word that AT&T will offer CallVantage through Best Buy’s 600-plus stores could do a lot toward making the technology a common household item (not to mention, it’s an interesting parallel to AT&T’s recent decision to discontinue marketing consumer long distance altogether).

A deal like this couldn’t come too soon for a telecom concern, judging by the building competition from cable operators, which are offering bundled broadband services that are fast including Internet telephony. (It’s enough to make one wonder whether the word «telecom» is fast becoming a misnomer.)

Some researchers surmise that cable will end up dominating broadband service delivery. Cablevision (NYSE: CVC) offers VoIP to its market, while Time Warner’s (NYSE: TWX) cable unit is expanding its offering this year. Comcast (Nasdaq: CMCSA), Cox (NYSE: COX), and other major cable providers are also rolling out such services and have the means to gobble up serious market share.

Consumers are going to look favorably on lowering their load of monthly bills; that much seems certain. With a little more than a half a million VoIP customers in the U.S., the market has plenty of room to grow. On the other hand, in this battle of telecom companies versus cable operators, it seems every new service to add to the bundle and lower costs is simply another way to win over the hearts (and wallets) of customers from rivals.

AT&T’s deal with Best Buy is testament to the fact that yes, the consumer is likely ripe for the service. Although such high-profile exposure likely gives an edge to AT&T’s CallVantage, which VoIP providers will win big financially seems the real question.

For more on VoIP issues, here is some additional Fool news and commentary:

Baby Bells, RIP, by Tom Taulli
Comcast Casts Wider Net, by Nathan Slaughter
VoIP: Why the Light Touch? by Bill Mann
Time Warner and Best Buy are both Motley Fool Stock Advisor recommendations. To find out what other stocks make the grade, try out the newsletter for six months, risk-free.

Alyce Lomax does not own shares of any of the companies mentioned, although writing this article made her wonder about lowering her monthly bills through VoIP.