Verizon Plans Consumer VoIP Service in Q2 2004

Verizon Communications plans to begin rolling out VoIP services in Q2 2004, targeting DSL users and the consumer market, said Lawrence T. Babbio Jr., Verizon's Vice Chairman and Domestic Telecom President, speaking at the UBS global communications conference in New York.


"VoIP for the mass market is coming," said Babbio, "and just like with LNP (local number portability) there is nothing anybody can do to stop it." Babbio said Verizon would be very aggressive in meeting or beating the pricing of any consumer VoIP service. The company is currently planning a two phase strategy. Phase One, beginning in Q2 2004, will be a non-QoS consumer VoIP offering that will be positioned as a second line service for DSL users. Verizon will either outsource the service or build the application itself. They will offer several plans for local/LD/international calling, as well as free on-net calling. It will also include numerous Web-based features, such as a voice portal, voice-dialing, web-based voicemail, and address book integration. Phase Two, beginning in Q4 2004, will be a managed network, QoS-based VoIP service designed to meet Verizon's traditional wireline quality standards. Babbio said the enhanced VoIP service would be positioned as a high-end application for work-at-home professionals and small businesses. The service would be delivered over DSL or T1 lines.


In more general comments, Babbio noted that the U.S. telecom business is a crowded field. He believes company execution and consumer brands will be the decisive factors in determining the winners. Verizon will continue to focus on consumer brand recognition for both wireless and wireline services.


Regarding LNP, Babbio said it is difficult to predict the full effect this will have on the market. However, he argues that Verizon is in a good position to benefit from the changes because of the customer satisfaction levels for its wireless and wireline services. He also believes that consumer telecom decisions are made at the retail store level, and that Verizon has the brand-presence to beat its competitors.


Regarding industry consolidation, Babbio emphasized that while the market is crowded by too many competitors, Verizon believes it already has the network resources it needs. Still, the company could benefit by consolidation among others in the field. Babbio also feels that there are too many under funded network equipment suppliers and that Verizon would benefit from the stability provided through greater consolidation of equipment providers.


Regarding its ongoing free cash generation, Babbio said Verizon's short term focus will continue to be on decreasing its net debt load. Net debt at the end of 2003 is expected to be $44.7 billion, compared to $51.8 billion at the end of 2002. He also noted that about 21,000 employees will be leaving Verizon's payroll this month under the company's employee separation program, giving the company greater flexibility in managing its costs.
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