Verizon Spies Daylight Via Voice Over Internet - TheStreet

One more Bell is getting set to ring in the Internet calling age.

Wall Street sources say

Verizon

(VZ) - Get Report

has been sharing some of its plans to unveil a voice over Internet protocol, or VoIP, calling strategy between now and April. The New York phone giant will join the other Bells --

Qwest

(Q)

,

BellSouth

(BLS)

and

SBC

(SBC)

-- in offering phone service via the Net.

Verizon wouldn't disclose any details of the plan, but a company representative said the April time frame is consistent with comments President Larry Babbio made last month at an investment conference.

Verizon's latest venture, and the assorted plans of its Bell peers, comes in response to cheaper calling plans being rolled out by cable companies and so-called voice-over-Net upstarts. Big companies are paying increasing attention to this issue, as highlighted by Monday's linkup of

Time Warner's

(TWX)

cable unit with

Sprint

(FON)

and

MCI

in a VoIP venture.

The Bells' shift highlights the big mainstream telcos' increasing focus on flexibility as the telecom industry continues to change. Stuck with stagnant revenue, these companies have recently turned to

cost-cutting to maintain their profits.

But some observers say that the real upshot of the move is less technological than political. Stung by competitive setbacks, the Bells are finally striking pre-emptively -- by painting a painful picture for governments that find their own budgets stretched thin.

It seems that after years of

revenue erosion compounded by the loss of customers to email and wireless services, the local phone giants aren't willing to watch another calling technology stomp on their turf without a fight. So this time, by joining their rivals in the VoIP revolution, the Bells look to be taking much of the battle to regulators.

On one side, you have the Bells facing competitors using VoIP technology, which is unregulated and not subject to an array of taxes and fees that apply to typical land-line calls. Meanwhile, on the federal and state side, you have lawmakers pushing for deregulation but not necessarily comfortable with the loss of proceeds from telco taxes and fees.

The Bells' intent, in part, is to show that millions of dollars in fees from phone customers could potentially stop flowing to causes such as the universal service fund, a pool of money used to help pay for broadband in rural and poor communities.

In a presentation to investors Monday, Qwest CEO Dick Notebaert defended his company's plans to offer VoIP service in several Minnesota communities by emphasizing that it can be sold at a 25% to 35% discount because it isn't subject to "government fees."

"They aren't saying VoIP is unfair because it is unregulated -- they are saying VoIP is unfair because we are regulated," says Bank of America analyst Dave Barden.

Analysts call all the planning and

maneuvering a snake dance of sorts.

It's no coincidence that when the cable companies started jumping into VoIP, the Bells started partnering with satellite TV broadcasters to offer video, say analysts. Now that other companies such as closely held Vonage have been gaining attention, the Bells are talking about jumping into VoIP to push the regulators to think about their agenda a bit.

"This is the smartest thing I've seen the Bells do in years," said one New York hedge fund manager with no positions in the Bells. "It's absolutely brilliant, and I don't even like the Bells."