Resigned to the inevitability that long-distance phone calls will one day travel as digitized packets over fiber-backbone networks and cost next to nothing, the legacy network providers--AT&T, MCI, Sprint and WorldCom--have officially started the voice-over-IP marketing hype as loudly and clearly as possible.

Though officials from the Big Four sound like they've been on the voice-over-IP bandwagon all along, actual service offerings reflect a more recent turnaround, one catalyzed by other competitors entering the market and low-balling long-distance prices.

New competitors not only include the usual suspects, such as Qwest Communications International in Denver and IXC Communications in Austin, Texas, which are both fiber optic wholesalers, but also ISPs such as PSINet. Each service provider has a price per minute lower than the next.

AT&T officials now confirm that a 7.5- to 9-cent-per-minute offer for voice-over-IP long-distance calling will start this summer in select major cities nationwide. Qwest will offer the same deal. These pending announcements make AT&T and Qwest the latest carriers to jump on the bandwagon of sub-10-cent pricing.

MCI has 5-cent calls on Sunday. Sprint has long had its 10-cent-per-minute evening calling. America Online now has a 9-cent-per-minute deal for its subscribers, offered through Tel-Save. But the AOL, MCI and Sprint deals, which are for regular analog calls, are just the starting point for these providers. These deals are being offered to consumers as a tease because Sundays and evenings are wide open times on the networks and they don't cost the carriers anything, says Boyd Peterson, telecom analyst at The Yankee Group. In AOL's case, it's an instance of a lesser-known carrier trying to drum up business in a competitive arena.

What makes AT&T's and Qwest's announcements more profound is they signal the beginning of the end of traditional long-distance pricing. Pricing for voice over IP means pricing according to a new infrastructure--one where there are no local access charges, says Peterson. MCI, Sprint and AOL offer pricing over analog because they're not yet ready to offer voice-over-IP services, but they don't want to appear to be behind the curve.

The catch for the legacy carriers, and for companies that hold long-term long-distance contracts with them, is that they don't have the honed business model yet to go head-to-head with the all-fiber-optic start-up carriers that built their business models on an IP future. This might mean that by the year 2001, a company's three-year long-distance contract with Sprint becomes outdated, compared with the voice features, service levels and pricing models that will be on the market then.

Qwest, the quintessential example of this new-age, well-funded carrier, will lay 16,000 miles of fiber by next year; and while its business focus is wholesale, it will still offer 7.5-cent phone calls as well. "Qwest's opinion of retail is that if you see a $100 bill in the street, you pick it up," says Peterson. "But its business model is to sell bandwidth to AT&T as a wholesaler."

For companies with expiring long-distance contracts, it may be worth approaching Qwest to see what it will offer, especially if companies have an immediate interest in multimedia traffic across leased telecom lines. Lew Wilks, Qwest's president of business markets, who is also former president of GTE and a one-time MCI executive, says, "Qwest's infrastructure punches a hole in 'dime-a-minute,' because it can, but the real focus is wholesale delivery of an Internet backbone that can handle all multimedia traffic."

Qwest isn't the only carrier worth checking out. PSINet recently got permission from the FCC to create a telecom subsidiary, PSINet Telecom, to provide long-distance and international phone services. Sources at PSINet say voice-over-IP services have always been high on the ISP's list. PSINet's ability to deliver cheap long distance will rely on its fiber acquisition agreement with IXC Communications, which plans to lay 20,000 new miles of fiber by next year (making its total 40,000 miles). PSINet will receive its first delivery of transcontinental OC-12 (622 million bits per second) fiber sometime this summer.