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December 6, 2004

By Craig Wolf

Just when you'd figured out cell phones, there's another player in the phone service arena.

It's called VoIP, or ''voice over Internet protocol,'' also known as IP telephony. Translation: phone calls over the Internet.

You'd better get used to it because it's spreading. It's big already and it's proving useful as yet another tool in the telephony toolbox.

Chief advantages are lower costs for long-distance and international calls, plus the ability to take your phone number with you while traveling.

Charles North has tried out voice over Internet protocol during demonstrations at a trade show held by the Poughkeepsie Area Chamber of Commerce, of which he is president.

''We've called people in foreign counties; my mother-in-law in Florida. It was fine,'' North said. ''I couldn't tell the difference. I think it's the wave of the future.''

Customers on board

One local entrepreneur, Robb Kinnin of Netstep Access Services in Kingston, jumped into the voice over Internet protocol market when it was in infancy and reports signing up about 1,000 customers so far.

''We were the first local company to do this in the Hudson Valley,'' Kinnin said. ''There are other companies that offer service to the Hudson Valley today, but I believe that we are the only company that is local today.''

It's called Calleveryone.com. Development began in March 2002 and service was rolled out to the general public in September 2003.

Top customer type is the small-office home-office segment, or SOHO, Kinnin said.

Bill Hicks of Kingston, who owns Spinning Webz, a Web design service, helped Kinnin set up his site and get the voice over Internet protocol system running.

''After we got done doing that, I liked it and I kept it,'' he said. ''I save money on a lot of my long-distance calls. If I have to go to a client's and be there for four, five hours, I can take it with me and plug it in and get my phone calls.''

But plenty of home customers are turning to voice over Internet protocol also.

''Of all North American homes, 19 percent will use broadband Internet connections for voice communications by 2008,'' said Margaret Schoener, analyst with Gartner Group in Stamford, Conn., in a forecast analyst published in June.

But POTS, or ''plain old telephone service,'' isn't going away. ''Nevertheless, most homes will retain connections through the public switched telephone network,'' Schoener wrote.

No change for wired

Gartner predicts the number of wired connections will remain at 134 million over the next five years.

Only 24 percent of households had broadband in 2003. By 2008, about 42 percent of them will add voice over Internet protocol service, Schoener predicts.

In 2003, about 300,000 voice over Internet protocol accounts existed. In 2004, the estimate is about 2.5 million, using Gartner data.

''This outlook masks the significant shifts within the North American consumer voice market,'' Schoener said in her Gartner report. These include shifts from traditional
switched access lines to voice over Internet protocol via either high-speed digital phone lines or cable as well as cellular-phone-only households who have no wired phones at all.

In other words, the growth is coming everywhere except in plain old telephones.

Kinnin said many of his customers have taken on voice over Internet protocol as a supplementary service.

''People keep both,'' usually, he said. ''They like the comfort of their conventional phone. They see the need for a second phone in their home, maybe for a child, or for ... an at-home business.''

Choices offered

Though the voice over Internet protocol field is young, it's already getting crowded, offering consumers a range of choice -- and the familiar problem of doing the detailed research to compare deals.

Phone companies are in it, of course, and so are cable TV providers. There are national voice over Internet protocol companies like Vonage, and systems for all sizes of companies provided by specialists like Avaya or Cisco.

Vonage is considered the industry leader in voice over Internet protocol companies, but there are others, including Packet 8, myPhoneCompany, Lingo Link, and I-ConnectHere.

Voice over Internet protocol tends to be feature-rich, bundled into the monthly charge rather than added on. Forwarding of voice-mail messages to you as e-mails is often provided.

There are some limitations. Voice over Internet protocol is strictly for people who have broadband connections. It does not work with dial-up Internet. It won't work when lines are knocked down by storms, but sometimes cable lines are still up while phones are down, or vice versa. The converter box won't work if the power's out.

Quality is generally good, close to hard-wire phones and better than cell phones, judging by several calls to Kinnin's outfit and some other reports. When the Internet is busy, there may be occasional blips.

''Call quality of Voip is competitive,'' says an article on Consumersearch.com, which collects and analyzes reviews. ''VoIP's biggest benefit is cost savings.''

You can often transfer your existing number to the new service, but not always. Alternate area codes are often available.

Most plans charge more for business. Calleveryone.com does not.

Phone purchase available

Buyers need to evaluate several factors according to their needs and calling patterns. The first question is whether you need to buy the box, about $100 or less, or get it as part of the deal, and if so, for how long. Check return policies and charges. Some have early termination charges.

Next comes the basic rate and what you get for it. Some plans have unlimited calling and others set maximums.

Overseas rates are almost always cheaper than regular phone service and can vary substantially from plan to plan. So if you constantly call Puerto Rico, compare prices for that.

One legal controversy with voice over Internet protocol is its wiretap status. A month ago, the Center for Democracy and Technology, a civil liberties group in Washington, sent a collection of protests from ''companies, trade associations and public interest groups from across the political spectrum'' opposing the Federal Communications Commission's plan to apply wiretap design mandates to the Internet. That would cover voice over Internet protocol.

The Federal Bureau of Investigation had pushed to preserve wiretap capabilities as phone service technology changed, and in March asked the FCC to include Internet and voice over Internet protocol, citing the Communications Assistance to Law Enforcement Act of 1994. The groups argued Congress never included ''information services'' including e-mail and voice over Internet protocol. But the FCC's proposed rule deems these a ''substantial replacement'' for phone service and would put them under the same law.

Who regulates voice over Internet protocol was another issue, so far resolved by the courts in favor of federal control, though New York state's Public Service Commission had sought to take that role here. And with regulation comes the issue of taxes.

The Internal Revenue Service is looking at voice over Internet protocol closely, having put out notice in July that a 3 percent excise tax appears to be applicable to ''telephonic quality communications.''

But even with a tax or a wiretap, voice over Internet protocol seems likely to grab a growing share of the phone market in years ahead.

Craig Wolf can be reached at cwolf@poughkeepsiejournal.com

How it works

What: Voice over Internet protocol is telephone service over the Internet, sending phone conversations over data networks rather than the standard telephone lines.

How: Your phone attaches to a converter box that hooks into your broadband Internet connection. Otherwise, it works much like a regular phone. The system converts conversation to the data packets that travel on the Internet and at the other end, converts these back to conversation.

How good: Quality is generally between hard-wired phones and cell phones. Quality may deteriorate when the Net is busy. Features are abundant, including ability to make your phone number travel with you on trips.

Cost: Some companies charge for the box; others give it free but charge if you cancel early. Savings on service, particularly long-distance and international calls, can be considerable.

Resources

- Vonage: Vonage; 1-vonage-help (1-866-243-4357)



 
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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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