US internet giant America Online has dipped its substantial toe into the shark-infested waters of telecommunications.

It has launched local and long-distance calls via the internet in 44 cities across the nation. The service is currently available only to AOL subscribers at a cost of $29.99 (€23.30, £15.96) per month for a trial period. In additions users must also pay for high speed online access.

And that is the point. AOL hopes the new phone service will persuade users to upgrade from dialup connections. Says James Tobin, vp of voice strategy: "The amount of money you save on phone service will more than offset the cost of moving to broadband."

The Voice over Internet protocol (VoIp) market may be young but is growing fast and is attracting the very biggest players. Telecoms giant Verizon has announced its Voicewing service and the nation's number one cable operator Comcast is launching Digital Voice.

Technology research firm IDC predicts 27 million Americans will be using internet-based phone services by 2009.

Data sourced from Washington Post Online; additional information by WARC staff