priceline.com, Net2Phone to Offer Bidding on Long-Distance Phone Calls

Visitors to priceline.com will be able to bid on phone calls that will travel over an Internet protocol network.
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SAN FRANCISCO -- priceline.com (PCLN) is expanding its "name your own price" business model to phone calls.

In a filing with the

Securities and Exchange Commission

,

Net2Phone

(NTOP)

said it plans to offer international and domestic "Phone2Phone" services through priceline.com. Phone2Phone works like a pre-paid calling card. Customers don't need a computer; they dial an access number over phone lines. Once connected, calls travel over an Internet protocol network -- rather than a traditional telephone network -- built for relaying voice signals.

That means priceline.com customers will be able to bid on blocks of minutes for domestic calls or calls to a specified country, as well as blocks of minutes that can be used to call multiple designated locations. Net2Phone also expects to work with priceline.com to develop a service that lets consumers make offers to purchase Phone2Phone services on a per-call basis, the filing said. The two companies will jointly market the program through the end of the year.

Net2Phone and priceline.com declined to comment on the agreement beyond the filing.

Net2Phone expects to pay priceline.com $17 million in increasing payments over three years. Under the terms of the co-marketing deal, Net2Phone will pay priceline.com at least $1.45 million. That could be good news for priceline, which announced last Thursday its fourth-quarter revenue would be

flat compared with third-quarter results.

"It's an innovative concept," says Preston Keogh, a principal at

EK Asset Management

, who used to own shares of both priceline.com and Net2Phone. But while intrigued, Keogh says there are other issues that continue to cloud priceline.com's future, such as whether the company can protect its

patent on the "name your price" business model.

The agreement isn't the first contact the two companies have had. In September, Net2Phone named Dan Schulman, president and chief operating officer of priceline.com, to its board of directors.

The deal also marks priceline.com's second telecom deal this week. On Monday, priceline said it signed a marketing agreement with

AT&T

(T) - Get Report

. When priceline customers sign up for AT&T service while bidding on an airline ticket or hotel room, AT&T will boost the bid price by up to $75, at no additional cost to the customer.