NEW YORK (Reuters) - Comcast Corp (CMCSA.O: Quote, Profile, Research) on Monday said it plans to offer residential phone service over Internet lines to about half of the homes in its territory by the end of 2005, raising the stakes in its fight against telephone companies.

The top U.S. cable operator said it plans to offer voice over IP service to about 15 million to 20 million homes in its coverage area by the end of 2005 and to about 40 million homes in 18 months.

The company, whose shares rose nearly 2 percent on the news, said it expects to have about 8 million phone customers within five years.

It will charge about $39.95 per month for unlimited domestic service to customers of its current video products, and charge $54.95 per month for new customers.

The Philadelphia-based company, which has talked much about intentions to launch into the phone business over the past few months, is the latest major cable company entering the arena.

Comcast executives said the company wanted to make sure it would be able to do it reliably and for profit before launching phone services.

"Our focus was to make sure it's a healthy business," Dave Watson, executive vice president of Comcast Cable, told Reuters. "There was a handful of things we went to school on over the past year."

Comcast currently serves about 1.4 million phone customers on older circuit switched systems it inherited from AT&T (T.N: Quote, Profile, Research) . The business, which earns about $200 million a year now, was losing about $200 million a year when it took it over in late 2002.

Comcast is betting that differentiated services, such as the ability to check voice mails over the Internet or videophone service, will help it better compete against incumbent telephone companies rather than price.

Time Warner Cable, the No. 2 U.S. cable operator and a unit of Time Warner Inc (TWX.N: Quote, Profile, Research) , which debuted phone service over Internet lines in May 2003, already offers the service to its entire 18 million-home territory.

Cablevision Systems Corp.(CVC.N: Quote, Profile, Research) , the sixth-largest U.S. cable TV operator, currently offers a bundled package deal of under $90 for video, high speed Internet and phone services.

Cable companies, including Comcast, also have said they are investigating ways to offer wireless telephone services to subscribers.

Watson, who declined to talk about wireless plans, said a wireless phone service could be integrated into Comcast's telephone services, such as the ability to locate and contact family members on the service through the TV, PC, handheld computer, or phones.

Comcast shares closed up 66 cents, or 2.03 percent to $33.23 on the Nasdaq.