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Spending
Web Phone Service May Have It All, Except Many Users


July 25, 2004

By Ken Belson

Two years ago, Allen Tsong had just about had enough. Tired of paying $50 a month for a local phone line from Verizon that he rarely used, he canceled the service and ordered a voice-over-Internet phone from Vonage, a start-up that entered the market two years ago. He has never looked back.

To start his service, Mr. Tsong, who lives in Brooklyn, attached an ordinary phone to a paperback-sized adapter that can send his calls over high-speed Internet connections. The biggest draw was the price: Mr. Tsong spends $15 a month for 500 minutes of calls anywhere in the United States or Canada, and speaks to family and colleagues in China for pennies a minute.

"Why shell out 40 to 50 bucks a month for a regular phone line?'' he asked, adding that he had installed another Internet phone in his Brooklyn office. "At first, my wife was skeptical, but as long as she can pick it up and get a dial tone, she'll use it."

Mr. Tsong enjoys many of its other features, too. He can check voice mail on the Web, keep his number when he travels and forward calls to a cellphone or other line.

In moving to the new phones, Mr. Tsong has joined a growing band of residential and business customers who want to free themselves from an old telecommunications order often marked by high taxes and lukewarm customer service - an old order that crumbled a bit more last week when AT&T announced that it was easing out of the traditional consumer phone business. And Verizon, the biggest of the Baby Bells, said that it would roll out Internet service nationally, a recognition that its traditional network is fast being eclipsed.

Once the province of techno-nerds, the new phones are going mainstream as a variety of companies, from start-ups like Vonage to more traditional companies, like the Bells and Cablevision, introduce services.

These companies can charge less for Internet phone services because the calls, sent as data packets, typically avoid the switching fees that make up the bulk of the cost of an ordinary call.

The flood of new offerings, though, has made it harder for consumers to distinguish between core needs, like price and voice quality, and all of the bells and whistles. But with a bit of searching and skepticism, you can cut your bill in half without sacrificing much of the reliability and quality of traditional phones.

First things first: to use a voice-over-Internet phone, you need a broadband connection, which typically costs $25 to $50 a month. That sounds like a lot, until you consider that you also get a reliable Internet connection that is 25 times as fast as dial-up service. Most cable and phone companies now sell broadband connections, but phone companies often require you to keep a regular line to get a high-speed Internet line. That makes an Internet phone superfluous, unless you want two lines.

Some companies, like Qwest, offer stand-alone broadband connections for $49.99 a month; others charge less for broadband lines if you keep your phone line. Companies like Time Warner Cable and Cablevision also offer high-speed data lines and voice-over-Internet phones with their programming, allowing consumers to bundle the three services at a reduced price.

Once a broadband line is in place, you are ready to compare Internet phone plans. As Mr. Tsong knows, price is the big selling point. Most providers offer scaled plans: the more minutes, the higher the monthly fee. Some, like CallVantage from AT&T, offer one price - $34.99, but with introductory specials - for unlimited domestic minutes, with no extra taxes. Dialing internationally costs more because carriers have to pay their overseas counterparts to connect the calls. But rates are still lower than for ordinary long-distance service. In a Vonage plan, a call to London costs 3 cents a minute; Tokyo costs a penny more.

One way to start comparing prices is to visit sites that list links to various voice-over-Internet providers. The sites include www.easycall.net/broadband-phone.shtml and www.cryptosavvy.com/voice_over_internet_protocol.htm.

If cost were the only factor, more consumers would have ditched their old phones already. Instead, only 300,000 or so have signed up, because most consumers remain hesitant about the quality of Internet calls.

As little as a year ago, those fears were valid. Many consumers, including Mr. Tsong, complained about hiccups in their conversations; these can occur when calls, as they are broken into packets of data, are momentarily lost while traveling over the Internet. Sometimes, calls go dead.

Better software and Internet connections have reduced these problems, but the same axiom holds: Internet calls are only as good as the lines that connect them. If your broadband connection is reliable, the quality of your calls should be, too.

There is an ancillary concern: the quality of the network your provider uses to connect the call. Cable companies and long-distance companies like AT&T and Covad, a national broadband service provider, run their own networks, so voice calls are less likely to break up. By comparison, Vonage uses five different networks to connect its calls, raising the likelihood of interruptions.

Still, the gaps among various Internet providers are narrowing, to the point that fewer and fewer consumers can detect the difference between traditional and Internet phone service.

"Consumers shouldn't believe the reports that the quality isn't as good as plain old telephone service," said Ford Cavallari, senior vice president of the broadband and media practice at Adventis, a telecommunications consultant in Boston.

Mr. Cavallari, who uses an Internet phone, is smitten with the features. Like most other users, he was able to keep his old number or choose a new area code from anywhere in the country.

The advantages are clear. When Mr. Cavallari visits San Francisco, he plugs his adapter into a broadband line and gets a dial tone from Boston. Friends calling him on ordinary lines in the Boston area are charged only for a local call, even though he is 3,000 miles away.

Like many business travelers, Mr. Cavallari uses a Web site to track every call he makes. He can also listen to his voice mail on the Web, because the calls are stored like any other computer audio file.

Like any emerging technology, though, voice-over-Internet has plenty of wrinkles. The biggest concern is losing service if there is a blackout. Some companies sell battery packs to keep modems going.

Consumers like Stephen Caccam, a Vonage subscriber in New Canaan, Conn., also complain about the time needed to transfer existing phone numbers to new Internet providers. The process should take a few hours, but Mr. Caccam spent weeks trying to sort it out. In the interim, Vonage gave him a temporary number, but not all his friends and relatives knew about it.

AND some services do not allow you to send faxes with a voice-over-Internet line. That can be particularly inconvenient for small businesses.

Perhaps the most hazardous variable is the inability of emergency services to automatically track callers who dial 911. When callers sign up for a phone plan, they can register their location with emergency services. Lawmakers are trying to hammer out regulations for these and other issues, and could eventually start taxing Internet lines like traditional phones.

Do not expect higher prices anytime soon, though. Lawmakers are unlikely to act before next year. And that means voice-over-Internet phones, while still not a perfect substitute for plain old phone lines, remain a good deal for many consumers.



 
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†AK and HI residents pay $29.95 shipping. ††Limited time offer. Valid for residents of the United States (&DC), 18 years or older, who open new accounts. Offer good while supplies last and only on new account activations. One kit per account/household. Offer cannot be combined with any other discounts, promotions or plans and is not applicable to past purchases. Good while supplies last. Allow up to 2 weeks for shipping. Other restrictions may apply.

1Unlimited calling and other services for all residential plans are based on normal residential, personal, non-commercial use. A combination of factors is used to determine abnormal use, including but not limited to: the number of unique numbers called, calls forwarded, minutes used and other factors. Subject to our Reasonable Use Policy and Terms of Service.

2Shipping and activation fees waived with 1-year agreement. An Early Termination Fee (with periodic pro-rated reductions) applies if service is terminated before the end of the first 12 months. Additional restrictions may apply. See Terms of Service for details.

HIGH SPEED INTERNET REQUIRED. †VALID FOR NEW LINES ONLY. RATES EXCLUDE INTERNET SERVICE, SURCHARGES, FEES AND TAXES. DEVICE MAY BE REFURBISHED. If you subscribe to plans with monthly minutes allotments, all call minutes placed from both from your home and registered ExtensionsTM phones will count toward your monthly minutes allotment. ExtensionsTM calls made from mobiles use airtime and may incur surcharges, depending on your mobile plan. Alarms, TTY and other systems may not be compatible. Vonage 911 service operates differently than traditional 911. See www.vonage.com/911 for details.

** Certain call types excluded.

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