BT has become the first UK telco to offer a mass-market consumer voice over IP (VoIP) service.
Its Broadband Voice package, launched on Tuesday, is primarily targeted at NTL and Telewest customers but will work just as well with an ADSL connection.
BT says that it is a ground-breaking product that will let cable customers save money on voice calls, but rivals have dismissed Broadband Voice as little more than a second phone line.
Broadband Voice consists of a box that plugs into an Ethernet router, modem or cable set-top box and transmits voice traffic over the Internet. It will cost £60, but will be free to anyone signing up before the end of March 2004.
Users will be charged £7.50 rental per month, plus 3p per minute for daytime landline calls with a minimum charge of 5p. Mobile calls will be significantly more, varying between operators. Evening and weekend calls will be free for the first hour, and 1p per minute afterwards.
BT claims customers using the device can save around £100 in the first year, based on certain comparisons between its prices and those of the cable firms.
An ADSL customer that wanted to get Broadband Voice would have to own a broadband router with Ethernet, as they couldn't plug it directly into their ADSL modem. Cable customers are in a slightly different position as their cable modem already has an Ethernet connection.
But a cable user without a router wouldn't be able to have their Broadband Voice and the broadband PC connection running at the same time, so investing in a router could be essential.
According to BT, many of the early adopters that it says will buy Broadband Voice will already have a router for their home networks.
A BT spokesman told ZDNet UK that the telco is considering integrating a router into future versions of Broadband Voice. He added that BT would be targeting ADSL users with routers just as vigorously as cable customers, and predicted that ADSL routers could soon be shipped as standard to new broadband subscribers.
Other limitations with Broadband Voice include the fact that the line quality could be poor, as packets will be travelling over the Internet rather than a single telco's network where higher service standards can be maintained. It also can't be used to make emergency calls, or to call premium rate numbers, so any user will probably have to keep their existing phone line as well.
Britain's cable operators have been offering "triple play" packages -- with savings for customers who choose to get their phone service, broadband and digital TV all over cable -- for some time.
Telewest says that it isn't concerned about losing subscribers to Broadband Voice.
"Over 90 percent of our blueyonder broadband customers recognise the unbeatable value and convenience of combining their internet access with a phone line and/or digital TV services from Telewest Broadband. Beyond BT's hype, consumers will soon realise the limitations of this offering," said Matthew Dearden, director of telephony at Telewest Broadband, in a statement.
"Our customers can be confident they are already enjoying a high quality service at comparable calling rates, and the benefits of a comprehensive telephone and broadband Internet package via cable," Dearden added.
Some in the industry are speculating that Telewest and NTL could retaliate by launching their own VoIP products and go after BT's voice revenue.
"There'll always be fighting on the beaches," admitted the BT spokesman. "It was nice to be first, and we're already working on future developments because we want to stay ahead. There's lots of clever stuff being developed in the labs."
Future VoIP innovations could include allowing users to conduct multiple calls simultaneously down one line. The main issue preventing this being deployed, BT says, is that broadband users haven't got enough bandwidth available for service quality to be maintained.
Analysts say that BT has been cunning to launch a product that will let it win revenue from cable companies, but which probably can't be accused of being unfair because its own DSL users can also sign up.
"Regulation would have prevented BT from launching a service targeted exclusively at cable modem customers and held back from DSL customers. But by choosing a technology which is more common among cable users, BT cannot be accused of launching a discriminatory service, while at the same time ensuring that the majority of take-up will come from non-BT customers," said Ovum analyst Jan Dawson.
Dawson also believes BT could risk upsetting customers if the line quality is too poor, or if people buy it without understanding the limitations.
ZDNet UK's Jonathan Bennett contributed to this report