Microsoft Wants To Be AT&T

The management at Microsoft is talking big about how its VoIP software is going to rule the world of telecommunications. The company says that its new server software, which allows companies to integrate VoIP into their server systems, will transform the telecom industry that way that Window changed PCs. "You’re going to see history repeat itself," Jeff Raikes, president of Microsoft’s business division told Reuters.

Microsoft says its VoIP initiative will bring in billions of dollars for the company in a new industry segment that will be worth as much as $40 billion per year worldwide. Microsoft predicts that the cost of integrating VoIP at enterprise customers will come down 50% over the next three years and as many as 100 million business employees will be able to access voice over IP using its Office software.

The predictions are not exactly good news for large telecom companies from AT&T (T) to BT (BT) to Deutsche Telecom (BT). It could also have troubling implications for phone providers in Asia like NTT (NTT) and Singapore Telecom.

US phone companies are already under siege by cable operators who offer VoIP to home customers and are taking away millions of consumers a year. The large domestic phone companies are trying to combat the trend by putting in fiber to the home, but the move is expensive and untested. Verizon (VZ) is spending $23 billion to build out a system that will allow it to market voice, broadband, and TV to its residential customers.

If Microsoft is right about its VoIP products, even partially, phone company executives have another reason not to sleep at night.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.