EarthLink plans to announce a bundled VoIP and high-speed Internet service next week that would undercut prices charged by phone and cable companies, as part of the Internet service provider’s strategy to reduce reliance on its dial-up business.

plans to announce a bundled VoIP and high-speed Internet service next week that would undercut prices charged by phone and cable companies, as part of the Internet service provider’s strategy to reduce reliance on its dial-up business.

The move is the most recent example of how the Atlanta-based company is attempting to offset its less-lucrative dial-up unit by concentrating on voice and other services.

Unlike phone and cable companies, EarthLink does not own its own network. That puts the former dial-up darling in a difficult position as consumers are increasingly converting to broadband. What’s more, recent federal regulation lets phone and cable companies block EarthLink from their networks.

In an interview with RedHerring.com last month, EarthLink CEO Gary Betty said that voice service was a key element in the company’s future strategy.

The company already sells a $20 VoIP product, similar to that of VoIP leader Vonage.

EarthLink’s bundled phone and Internet service doesn’t require consumers to add additional hardware. The technology is called “line-powered voice,” and takes advantage of technology from partner Covad, which owns hardware that sits on DSL networks.

The service is already available in Northern California, Dallas, and Seattle. It costs $70 per month for unlimited phone and high-speed DSL service, $65 for unlimited phone and a slightly slower DSL speed, and $50 for DSL plus 500 minutes of voice.

EarthLink has found a way to work around rulings last year from the Supreme Court and the U.S. Federal Communications Commission that phone and cable companies could keep Earthlink from selling services over their networks.

The service will be marketed to DSL consumers, not cable’s broadband customers.

Dial-up Days

Dial-up services still represent more than 50 percent of the company’s revenue. But every month, the company loses dial-up customers who have moved to broadband services.

EarthLink has 1.6 million customers for its broadband service, which it sells through various collaborations with the phone and cable network owners. But because of the new federal regulations, EarthLink has had to turn to other ventures.

The company is building a city-wide wireless network in Philadelphia, partnering with a public organization (see EarthLink Lands Philly Wi-Fi). It plans to build a similar network in Anaheim, California. The company is planning at least five other networks in cities in the United States.

In spring 2006, the company plans to launch a wireless service with South Korean cellular carrier SK Telecom, called Helio, in which the company will invest $220 million (see Helio Rises to Mobile Test and EarthLink’s City Cell Phones).

EarthLink’s City Cell Phones

Through cost cutting and streamlining the business, EarthLink has managed to turn around four years of losses and bring in net income of $111 million on $1.4 billion in revenue during 2004.

Even better, the company is expected to record fiscal year 2005 profits of the highest in company history at $139.03 million, on February 9.