Howe sees retail VoIP offerings competing largely on price against the incumbent local exchange carriers (ILECs), displacing wireline offerings, and is quick to point out Earthlink is rolling out a second-generation VoIP product–called Home Phone–in conjunction with Covad that takes away a lot of the hassle with current retail grab-and-go solutions. “It’s based on a DSL2+ platform, so that line to your house provides both voice and very high-speed data,” he says. “We move the ATA functionality out of the home and to the central office. Consumers don’t want to worry about the [ATA and whether or not] the phone needs to be next to the ATA or the ATA needs to be next to the broadband connection. What consumers just want is the phones to work. There’s no box to install. You just wake up one morning, you hot-cut over to Earthlink service, and you get dial tone. That’s the customer experience we’re used to for the last 60 years.

“We think if you have the choice between an Earthlink Home Phone service and a DSL bundle and on the other hand an ATA voice product, you’d absolutely choose the home phone service bundle every day of the week and twice on Sunday,” says Howe. By converting the customer over at the central office (CO) and using the existing wiring, the customer gets the best of both worlds–the cost-savings and features of VoIP, without having to worry about ATAs, home LAN configurations, and quality-of-service issues. Calls are converted to VoIP at the CO and go directly into IP, so customers can use their existing telephone handsets and multiple extensions without having to convert any of their legacy hardware. Earthlink’s Home Phone is available in twelve cities, and the company will be looking at other markets as it continues to consider its options.

But what if you’re not in a Home Phone-served city? “We’re going to launch shortly…WiFi phones,” says Howe. “It’s going to be exciting and leverage our WiFi network.” Howe wouldn’t divulge much about the WiFi telephony service, as details were still being worked out at press time. “Now that you have these [municipal] networks, WiFi can act as a cheap cellular network,” he says. “Plus WiFi has the additional speed.” Howe says a WiFi phone could conceivably save anywhere from $50 to $60 per month when compared to the cost of a traditional cellular plan. For coverage outside of Earthlink municipal networks, roaming deals with other WiFi networks are the most likely solution.

SunRocket is the newest entrant to the retail VoIP space, and the move is an expansion of its existing customer acquisition strategies. The company has used its Web site, an inbound sales number, and affiliates to sell its service, but announced a relationship with Thompson –the licensee of the GE brand for consumer phones–to gain a presence on store shelves.

“We’re obviously watching and talking to folks in terms of partnerships that make sense,” says Lustig. “In order to enter retail, it has to make sense from an economic perspective. Vonage, in some ways, has succeeded based on scale. But it all comes down to cost per subscriber. Now it’s very high. The cost paid to a Best Buy or a Circuit City is quite high. It doesn’t make sense for us at this point to