Internet telephony (IP) telephony services have been available since the 1990s. Recently, this market has shown rapid development in terms of new services offered and an impressive increase in the number of users around the globe. Such developments put IP telephony in the spotlight. This article explores the diffusion of IP telephony by focusing on home users and the dynamics of the residential market. It combines insights from diffusion of innovation theory and network economics to investigate users and potential users' perceptions of the key economic factors and their impact on the diffusion process. The article uses Denmark as an example of a technologically advanced market with technologically mature consumers. Empirical data are collected through an online survey conducted in Denmark. The results highlight the economic factors that affect the diffusion processes and offer useful insights to other less technologically advanced countries on IP telephony market developments.