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Internet Calling Rings Up Satisfied Customers

February 7, 2005

By Reggie Beehner

Voip is cheaper than land line, packed with features.

Richard Day was annoyed with his home phone bill. Although he used his cell phone for almost all his calls, Day still maintained a-traditional land line at home as a backup.

But the $40 bill, which covered only local service, seemed awfully high to the Lexington man,-especially considering how rarely he used his home phone.

So eight months ago, Day dropped his land line and took a chance on an experimental new serv-ice he'd heard of through a friend: Internet phone calling.

He's glad he made the switch. Not only did Day cut his phone bill to $27 a month by signing up with Vonage, an Internet phone company, he also enjoys unlimited long-distance calling and a host of other features he didn't think possible with a bargain-rate phone service.

Now his voice messages are-automatically routed to an e-mail account, allowing him to check them at work or forward them to his wife. And whenever he's on the phone and about to leave his house, he just hits a button, instantly transferring the phone call to his cell phone.

"It gives you just about every cool feature," said Day, 30, owner of a Lexington cash-advance store. "And the voice quality is pretty much comparable to a regular land line."

Once considered a fetish for tech hipsters only, Internet-calling has made the leap to mainstream. Thanks to-technological innovations and low prices, Internet dialing has surged in popularity over the past two years.

Nearly 1 million people have signed up for Internet calling, and the number is growing quickly. By the end of 2005, the number of subscribers is-expected to reach 3 million,-according to the Yankee Group, a market research firm.

The success of early-Internet phone companies -- particularly Vonage, which now has more than 400,000-subscribers -- has caused many cable companies and phone-giants to take notice.

Last year, both Verizon and AT&T launched their own-Internet calling services. So did several cable companies, such as Cablevision, which already has signed up nearly 300,000 subscribers to its Internet phone plan.

"The whole communications industry is transforming," said Kate Griffin, a senior analyst at the Yankee Group. "Everybody's encroaching onto everyone else's space."

The rapid rise of Internet calling is attributable in large part to the underlying-technology -- Voice over-Internet Protocol, known as Voip (pronounced "voyp").

Unlike traditional phone calls, which travel along copper wires and circuit switches, Voip calls are analog voice signals converted into packets of digital data, which are then compressed, routed through the Internet, and reassembled before arriving at the receiving phone.

Gary Morgenstern, a spokes-man for AT&T, said the technology is more efficient and more cost-effective than traditional phone networks. As a result, he expects most of the major phone companies to-convert to VoIP-based networks over the next few years.

"It's not a question of whether Voip is going to-dominate the telephone calling industry," Morgenstern said. "The question really is when."

Low prices, great features

Already, consumers are-reaping the benefits of-increased competition.

With dozens of companies trying to woo new Internet callers, prices have plummeted to all-time lows. Currently, most plans cost between $20 and $35 a month -- and those prices include unlimited local and long-distance calling to the United States and Canada.

Many customers, originally lured by the savings, are soon hooked on the features, which outperform those of traditional phone rivals.

Unlike traditional phone lines, which are routed to a fixed location, Internet calls travel to an adapter box, which is mobile. That means the adapter can be plugged in at another location -- even-overseas -- where all incoming and outgoing calls will continue to work as though the person were still at home.

"The thing about the-Internet is there are no-geographic boundaries," said Mitchell Slepian, a Vonage spokesman. "As long you have a high-speed Internet connection, you're good to go."

However, that same-convenience also highlights why Internet calling doesn't-appeal to everyone: For the-service to work, it requires a broadband Internet connection.
Although that might not be an obstacle in major cities, where broadband services are abundant, it can pose a real problem in Kentucky,-particularly in rural areas.

Nearly one-third of the state's population has no access to broadband service. In-addition, only 22 percent of the state's households subscribe to broadband -- significantly less than the 32 percent national average, according to state figures.

Internet calling has other drawbacks. Consumer surveys show that Internet phones have better voice quality than cell phones, but they still lag-behind traditional phone-service. Some customers report an echo effect on some calls, according to several surveys.

"That's why you get to save money," said John Vincenzo, a Verizon spokesman. "But the trade-off is the slight difference in voice quality."

Industry representatives said the echo problem will go away once technology upgrades become available.

Another hindrance: Internet phone companies that offer few local phone numbers.

Many of the companies don't offer numbers in areas outside metropolitan regions. In Kentucky, for instance, local numbers are available only in Lexington, Louisville,-Frankfort, Nich-olas-ville,-Versailles, Wilmore and a few other cities, depending on the Internet phone company.

If someone lives outside of those areas, they're out of luck.

Still, these shortcomings haven't dampened Day's-success in luring half a dozen of his friends to Internet phone service.

They've had no complaints, and each referral has meant a free month of phone service for him.

"I haven't had to pay a phone bill in months."

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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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