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Vonage Holdings Corp. Reports Fourth Quarter and Full Year 2013 Results

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Internet Phone Service Is A Money Saver

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Talk Is Cheap
Internet Phone Service Is A Money Saver, But Should You Make The Switch?

October 1, 2004

By Adam Baer

Ever since Alexander Graham Bell picked up a receiver and said “one large pie with pineapple and ham,” landline phones have worked more or less the same way. That’s about to change: A new technology called voice over IP (VoIP) is revolutionizing the way we reach out and touch someone, delivering an expanded menu of features and promising drastically lower monthly bills.

Conventional phone service relies on expensive, antiquated switches to route your calls. Voip converts voice signals into digital data and zaps it over the Internet like e-mail. (See page 146 for a detailed explanation.) A broadband cable or DSL connection is required, but you can use the same old phone you have now, hooked up to an adapter supplied by your Voip provider. Plus, you get a standard 10-digit number.

Why bother? Well, monthly fees are less than half the average $70 most people pay now. And since the calls are just bundles of data, they can easily be integrated with your PC, cell phone, or PDA – you can, for example, have voice messages e-mailed to you when you’re out of the house.

The first companies to offer Voip were small shops such as Broadbox and Vonage. But AT&T and Verizon recently made it available, and Time Warner Cable is readying service, too. It’s no surprise that cable firms and former Baby Bells are getting into the game: Gartner Research predicts that by 2008, 23 million consumers and 3.6 million businesses in the U.S. and Canada will be using VoIP. “That’s a 92 percent annual growth rate,” says Elroy Jopling of Gartner. It VoIP’s popularity continues apace, all telephone service could be broadband 10 years from now. Before dialing into the digital age, take a look at our walk-through.

Old School: How Regular Phone Service Works

    1. Dial a number, and the analog signal travels over copper wire and into a box outside your house.

    2.Your call passes through a series of switching stations that route it toward its final destination.

    3.Once the signal reaches the phone box of whomever you dialed, that person’s receiver rings.

    4.The recipient picks up, establishing a circuit between you two—no other calls can use these wires or switches.

    5.Hanging up closes the circuit, and all the wires and switches are freed up again.

New School: How Voice Over IP Service Works

    1. When you start dialing, a special adapter converts the analog signal into packets of digital data. Each packet is tagged with an ID that indicates which part of the message it contains.

    2.Routers pass the various parcels of data across the Internet, using the fastest path available at any given moment, to the telephone number you are calling.

    3.Once the packets reach your party’s Voip adapter, they’re reassembled into a voice signal. If th person you’re calling doesn’t have VoIP, this happens at a nearby switching station.

Voip Pros

  • For a flat rate ($20 to $40 per month), you can get unlimited calling anywhere in the U.S. and cheap—two to seven cents per minute—international rates.

  • Most services will notify you via e-mail when you’ve received a voice message, and they’ll even attach it as a sound file.

  • You can select your area code. For example, if you live in Chicago but do business in Los Angeles, you can opt for a 310 number, and all your clients’ calls to you will be billed as local.

  • Your Voip line isn’t tied to a particular location, so you can take it with you. Plug your adapter into any broadband connection in the world and you are ready to talk.

  • Voip numbers are unlisted (though some providers let you opt in), holding telemarketers at bay,

  • Online logs help you keep track of every call.

Voip Cons

  • A broadband connection ($30 to $50 per month) is required.

  • Sound quality is inconsistent, delays, echoes, and blips aren’t uncommon, though companies promise improvements over the next few years.

  • Unlike old-school telephone service, Voip won’t work during a blackout.

  • Voip providers aren’t required to offer 411 or even 911 service, though some do.

  • It’s still the internet, so you’re likely to experience occasional slowdowns and glitches.

  • You must dial 1, plus the area code, for both local and long-distance calls.

  • Not all area codes are available, and some oft-requested ones, such as Manhattan’s 212, can be difficult to get.

From Low Cost to No Cost?

Voip slashes the price of making a call but doesn’t eliminate it. That’s where Skype comes in. With the downloadable app, you send voice traffic over the Net, anywhere, for free. Service and reliability are comparable with that of VoIP, but the program works only on a PC—with a mike and a speaker—and you’re limited to calling other Skype users (unless you sign up for SkypeOut, a prepaid service that lets you dial up any landline phone). The company is exploring ways of integrating its free technology with the caller’s headset. Until then, you’ll have to point and click for a dial tone.

Who Offers It Now
A Sampling of National Voip Providers
Company Vonage
Number of Available Area Codes 179 from 39 states
Rates $29.99 a month for unlimited local and long distance
Popular Features Basic, Voicemail email, 911, 411
Basic Includes voice mail, caller ID, call waiting, and call forwarding
Voice mail e-mail Forwards messages to your inbox as sound files.
Do not disturb Tells callers you’re busy and sends them to voice mail.
911 Connects you to emergency services in the area you call from.
411 Accesses directory assistance (cost: about a dollar per call).


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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 for details.

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