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Is Your Future Telephone Also Your Computer?

July 1, 2005

By David Radin

Americans love bargains, so any service that saves them money is likely to be a big winner in their eyes -- especially if the newer service has bells and whistles that make it functionally more appealing.

That may explain the recent growth of Voip -- short for voice over Internet Protocol -- telephone services.

These services use the technology of the Internet to decrease the cost of phone service from what traditional phone companies typically charge.

Internet phone service can be had for as little as $15 a month for 500 minutes of service and $25 for unlimited usage.

But the savings are just the start of the story. Voip services add new functions that make life easier for the technology's growing number of users, from regular voice mail and the ability to forward calls to cell phones and other numbers to the addition of extra phone numbers that can be used in other area codes to keep long-distance charges down.

In the past few years, some 1.1 million people across the country have switched from traditional phone service to VoIP, according to Kate Griffin, program manager at Yankee Group.

That's still a drop in the bucket compared with the 113 million existing residential telephone lines in the United States.

But the Yankee Group's Griffin estimates that by 2009, 28.5 million traditional phone customers will have made the switch. Vonage, an independent company based in New Jersey, has been among the most aggressive, gaining an early lead with 318,000 subscribers, she said.

Although the market is still very young, it has attracted players from such traditional phone companies as Verizon and AT&T, cable companies such as Comcast, Time Warner and Cablevision and small independents such as Vonage and Lingo. The cost of getting into the business has gotten so low that almost any small telephone company can set up Voip service, said Mike Centrella, principal at New Jersey-based Momentum Technology Partners.

The question is, how many of these smaller companies will last? Centrella suggests that price is the primary draw to the service for consumers. But for younger companies offering it, the issue is being able to compete in price over time with bigger companies with much deeper pockets and more resources to provide all the bells and whistles that come with Internet phone service.

Virtually all the players in the Voip arena have a Web interface to help you track calls and get your voice mail, as well as a more traditional voice prompt system that you can access from any telephone.

Each Voip service provider also provides its own touches, from distinctive rings for customers with multiple lines to allowing users to set a schedule for when phone calls should automatically forward to cell or other phones. Most even provide extra numbers in other area codes so your relatives far away don't have to pay a toll to reach you.

Each service provider has accentuated its own strengths.

For example, Lingo, a service of international phone carrier Primus Telecommunications, has traditionally served international markets and U.S. citizens for whom English is a second language. So the company offers aggressive international rates, and phone numbers that are local in 15 countries.

Despite its popularity, Voip is still a small player in the telecommunications arena and is unlikely to become the only way people communicate by phone in the future, said Carl Lender, of CSI Consulting, in Fort Lauderdale, Fla. "Based on the buzz, Voip seems ready to take over the world, but you can't take over the world with a million users."

Lender suggests that the growth will come as more people recognize how to mirror their current, traditional multiphone installations with VoIP. For most people, that requires bringing in an installer to set it up. It isn't the type of installation for which you go to the local retailer and pick up a phone adapter to install yourself.

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