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Lower Phone Bills

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Net Effect: Lower Phone Bills

August 13, 2004

By Eric De Regnaucourt

Douglas Mayle, an American software developer who lives on the French Riviera, has several phone numbers -- including two in cyberspace that carry U.S. area codes.

When he wants to call friends or family back home, he uses an ordinary phone that's attached to a box connected to his computer. When friends and family in the U.S. want to call him, they dial using one of his U.S. numbers and he answers on that same phone. In both directions, it's a domestic call -- in some cases a local one.

"It saves me hundreds each month," Mr. Mayle says, and it saves the people calling him as well. Mr. Mayle can take his U.S. numbers anywhere he can get an Internet connection with enough bandwidth (at home he has a DSL connection).
It's a long distance between the U.S. and Europe -- but an Internet-based telephone service can turn an overseas phone call into a local one. The same technology can slash the cost of calling within Europe.

This technology, known as voice over Internet protocol, has been around for a decade, but it long suffered from poor sound quality and low awareness. As Internet infrastructure has improved, however -- notably, with the widespread availability of home broadband connections -- so has sound quality, making Voip the equal of a regular phone for many uses. (If you've ever used a low-cost phone card, you may already have been introduced to Voip without realizing it.)

Personal Journal took a look at the ins and outs of Voip and learned what you need to know to decide whether it will work for you, and how to make the leap. Along with the advantages, there are some potential pitfalls to consider.
Setting up a distant number is just one Voip strategy, suited to those whose telephone traffic runs heavily to one country. You can also use Voip to make cheap calls in the country where you live, and around Europe, by signing up with a provider in that country and getting a local number there.

It's less expensive because the Internet transmits a conversation much more efficiently than a traditional telephone network, which requires that a circuit be completed from caller to receiver -- a wire connection between the two that is occupied for the duration of the call and can't be used by anyone else. For Internet calls, by contrast, the sounds are converted into packets of digital data that then travel alongside packets from other people's phones, or packets containing bits of e-mail, Web pages, streaming video or whatever.

No dedicated circuit is needed, and the call is actually more secure than those made the traditional way. (And while the person making a call over an Internet service must use a phone hooked up to a Voip terminal -- the box that attaches to the computer -- the person at the other end can take the call on a phone with an ordinary connection.) Much less infrastructure is required, which is one reason Voip calls are so cheap. Another factor: The Internet calls are free of many of the fees and taxes attached to a traditional phone call.

Ramiro Calvo and Soujanya Bhumkar run a company called Vazu Inc., which has software developers in India and a head office in California, where both men live. But because the developers and head office both have Voip service, they can communicate very inexpensively. The two men also saw to it that their parents -- Mr. Calvo's in Bolivia and Mr. Bhumkar's in India -- got Internet phone service, which they now use to communicate with their children around the world. Mr. Bhumkar says he now talks to his parents "literally every day."

An Internet phone can't fully replace a fixed line at this point. And of course, Voip can present complications that a standard phone does not. Insufficient bandwidth -- not all broadband connections are equal -- can cause Voip to work poorly or not at all. Internet congestion can harm sound quality. "The Internet isn't managed like the phone-company network, so users can experience call-quality problems like echos and speech delay," says Jan Margot, a spokesman for Belgian fixed-line provider Belgacom, in an e-mail interview. Calling the police or fire department or accessing information services can be complex or impossible, he adds. And the phones won't work in a power outage.

The regulatory treatment of making phone calls over the Internet is up in the air in many countries, with the burden of compliance falling largely on consumers, because the providers disclaim responsibility. And Voip providers can be reluctant to extend themselves outside their home country, which means people looking to get a phone number on another continent may find the provider won't ship the equipment to them or let them establish an account where they live.

But those willing to put up with or work around the various inconveniences of being a pioneer can save a lot of money. And the software-run nature of Voip allows operators to offer features freely: Services such as caller ID, call waiting and three-way calling are often standard. One of Mr. Mayle's favorites is voicemail, which he can program to take a message as it arrives, attach it as an audio file to an e-mail and send it to an address he designates. Voip can also be set to "follow" the user and forward calls to multiple numbers. For example, a user could have calls ring on his mobile and office phones at the same time as they ring on his Internet phone, or he could forward only the calls he did not answer.

For expats, the most attractive quality may be portability. A Voip terminal can be plugged into a broadband Internet connection anywhere in the world. "An IP address is a lot more powerful than a phone number," says Carlos Bhola, one of the founders and former president of Vonage Holdings Corp, a consumer Voip provider. (An IP, or Internet Protocol, address establishes a location in cyberspace.) "Fixed lines are encoded to a physical device that is geographically located; an IP address exists anywhere in the world."

An American in Germany, for example, can subscribe to a Voip provider offering U.S. phone numbers. He can even sign up for multiple numbers, as Mr. Mayle does. By having a number in the city where his family lives and another in his former home city, he allows friends and family to telephone him for the cost of a local call. Mr. Calvo and his parents have phone numbers not only in the same area code, but in the same exchange. Sound quality is such that callers would probably be unable to tell that they've just dialed halfway around the world.

Voip is being marketed heavily to residential customers. In the U.S. and Europe, many broadband providers, such as cable-television and phone companies, are rolling out the service. In all, there are hundreds of providers, but filtering out those that sell only to businesses and those that offer Voip only to existing subscribers (cable companies to their cable customers, for example) leaves three major providers of standalone Voip services for the home: Vonage, AT&T's CallVantage and Net2Phone, all U.S.-based.

There isn't much to setting up for the service. The provider ships new subscribers a terminal box and instructions -- basically, plug a network cable from the modem into the voice terminal, another from the terminal into the computer, and a power cable into the wall.

But before signing up, you should make sure your Internet connection is giving you at least 128 kilobytes per second of bandwidth in both directions, says Mr. Bhola. Poor connections or Internet congestion can cause packet loss and latency (waits between the sending of data and the receipt of a response), and there is very little that can be done to fix these problems. But you can test your lines before making the plunge with widely available "ping" software -- such as Ping Plotter, one version of which is available free at

There is also uncertainty about the regulatory future. The prime question is whether regulators will treat Voip as a telecommunications technology or an information technology -- that is, whether an Internet phone is a telephone or the Internet. "In some countries, Voip is able to offer cheap prices purely because regulators don't recognize the service providers yet as phone companies," says Belgacom's Mr. Margo. Its infrastructure will almost certainly keep Voip less expensive than traditional phone systems, but prices may rise due to regulatory expenses and taxation.

Most Voip providers say that they support their service only in specific countries, usually the country where the service originates. That doesn't mean you can't use it elsewhere: The provider may not ship the hardware to you, but the box is small, and you can have it reshipped by a friend in a country where the service is supported.

Billing is almost always done by credit card, and it may be necessary to have a card issued in a country where the service is supported. But Mr. Mayle says he didn't have a problem getting Vonage to bill a French card.

One reason Voip providers restrict their support is to avoid the complication of dealing with multiple countries' licensing requirements.

Both the U.S. Federal Communications Commission and the European Commission's Information Society Directorate have advocated a hands-off approach. But most telecommunications regulation in the European Union is done by the individual member states, and so can differ from country to country. In Belgium, for example, the use of Voip isn't illegal, says Belgacom's Mr. Margot, but the provider should notify the telecoms ministry before it begins to offer the service.

One noncomplication, generally, is the phone. The provider can tell you the specific standards, but basically any phone that has or can be fitted with a U.S.-style modular plug will work. Likewise with the plug for the Voip terminal -- most can handle different voltages, but you may need an adaptor to make it fit your outlets. "I literally got it out of the box, plugged in the handset, plugged in an ethernet cable, plugged in the power, and it worked," says Mr. Calvo.

Still, it would be prudent to hang on to your fixed line for a while. You may find your Voip service doesn't work properly, or that the sound quality isn't satisfactory. And while Mr. Bhola predicts that the price of a call overseas will someday be the same as a call next door, right now there is a difference -- and your neighbors might resent having to call overseas just to invite you over for coffee.

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