updated 4/7/2005 8:28:58 AM ET 2005-04-07T12:28:58

America Online Inc. on Thursday launched its Internet telephone service, jumping into a market that's already crowded with startups, cable operators and even traditional phone companies.

The AOL Internet Phone Service, which is being offered to AOL members and others in 40 markets at first, includes the regular features of traditional telephony and combines them with advanced services that are accessed on a PC over the Internet.

The offering "will uniquely combine advanced tools, competitive pricing plans and AOL's hallmark ease of use to allow mass-market consumers to take full advantage of the revolution underway in Internet voice technology," said Jon Miller, AOL's chief executive.

Instead of traveling over the traditional phone system that's been around for more than a century, calls are converted to packets of data and streamed over the Internet.  All providers generally charge less and offer more advanced features than traditional phone companies.

The technology, known as Voice over Internet Protocol, VoIP, is being touted as the next big revolution in communications.

Dozens of companies have entered the market in recent years, ranging from startups like Vonage Holdings Corp. to traditional telecom players like Verizon Communications Inc. Most major cable operators are also developing or rolling out services.

AOL's subscribers must have a high-speed Internet connection and a router. An adapter connects to the router, and a conventional phone can be plugged into the adapter. Users will receive a number and can make or receive calls.

AOL's starting price for new users is $29.99 per month for the first six months — increasing to $39.99 after that.  It includes unlimited local and long-distance calling within the U.S. and Canada as well as unlimited access to the regular AOL service over existing broadband.

Plans for current AOL users start at $13.99 a month (increasing to $18.99 after three months) for unlimited local and regional calling to $29.99 (increasing to $34.99) for a global calling plan with low international rates.

The price for new users is steeper than the current Internet telephony leader, Vonage, which charges $24.99 a month for unlimited U.S. and Canada dialing.  Packet8, a similar service offered by 8x8 Inc., charges $19.95 for its "Freedom Unlimited" plan.

AOL is apparently trying to differentiate itself by bundling its online service.  It also claims to make it easier for consumers to manage their service from a Web-based "dashboard," which New Jersey-based Vonage also uses to describe its Web-interface.  From there, users can change call-forwarding settings, view call logs and access contact lists that will dial a number simply by clicking on it.

Subscribers also will be able to see if someone is online — and theoretically available — to chat by instant message or by voice, the company said.

AOL also is trying to avert a criticism lodged at other Internet telephone companies by providing enhanced 911 service that delivers a caller's address to dispatchers in case of an emergency.  Packet8 currently offers the same, but charges extra.  Vonage takes a different approach that requires users to register their address in advance.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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