Wd Jan 25, 2006

AMSTERDAM (Reuters) - The top five Dutch cable companies plan to connect their Internet telephony networks, opening the door for free phone calls between their 450,000 phone subscribers, they said on Wednesday.

The companies plan to set up an exchange, eliminating the need to route such calls via the traditional phone network, said Sikko de Graaf, Chief Executive of CaiW Diensten, the services arm of one of the five cable firms.

While it would be up to the individual companies, which together cover virtually all Dutch households, how to price their voice-over-Internet protocol (VoIP) service, "it will open the door for free...telephony and video," De Graaf said.

"You will see the cost of telephony in the Netherlands come down very rapidly," he said.

The move by the cable companies -- UPC Netherlands, Casema, Multikabel, Essent and CaiW -- is a further sign that Dutch telecoms group KPN faces stiff competition in its home market.

The five firms cover 95 percent of the Netherlands, have 7 million cable television customers and are adding 50,000 telephone subscribers a month. This would push the number of households using Internet telephony above 1 million by next year, De Graaf said.

The Internet telephony service offered by cable operators and increasingly by telecoms operators is different from completely free VoIP services such as Skype, which requires a computer connected to the Internet.

Internet telephony offered by cable companies works with regular phones and is usually charged by the minute, although it is cheaper than traditional telephony services.

The cable companies selected Britain's XConnect and New-Jersey-based Kayote Networks to set up the exchange in Amsterdam.