As the appeal of voice over IP grows among businesses and consumers, telecom vendors are scrambling for position. Sprint Nextel Corp. last week moved to strengthen its grip on the market by filing a patent-infringement lawsuit that names two small, yet successful, VoIP providers.

A U.S. District Court suit naming Vonage Holdings Corp., which sells consumers low-cost subscription phone services, and theglobe.com, a provider of free computer-based phone services through its Voiceglo subsidiary, alleges infringement on seven patents for processing and delivering packetized voice and data communications. A Sprint spokeswoman says the company took action after a year of unsuccessful discussions, including licensing proposals.

Voiceglo president Ed Cespedes denies the claims and says Sprint is worried about the smaller and more nimble players. "I have 35 employees and our products are on 5 million desktops around the world," he says. "We are absolutely a threat." Vonage declined comment.

Traditional telecom vendors are increasingly looking for ways to compete in the VoIP arena--they'd be foolish not to. "VoIP gives us a lot more options and flexibility than we've had in the past," says Brandi Landreth, Allstate Insurance Co.'s senior manager for network and voice solutions. Allstate will have 10,000 users of Avaya Inc.'s VoIP technology by year's end, she says.

Sprint's VoIP offerings include a managed service for businesses, and it has a deal with Avaya to offer hosted VoIP. Verizon offers a wider range of VoIP business services than Sprint, plus VoiceWing, a home VoIP package.