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Internet Phone Calls Entice Consumers, Industry


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Longer Obscure, Voip Is Catching On With Major Telecoms

December 12, 2003

By Dan Richman

Save 20 percent on your phone bill and get cool features that just aren't possible with conventional phone service?

That sounded good to Bainbridge Island's Bob Silver, who in September began using a once-obscure technology that suddenly seems irresistible to major telecom players: Voice over Internet Protocol, or VoIP.

Within the past 10 days, three of the nation's regional phone companies -- including Qwest, which provides local phone service to most of Seattle -- have announced plans to create or expand Voip offerings for both consumers and businesses. So have AT&T Corp. and Time Warner Cable.

None of those companies offers Voip in Seattle yet. Silver, founder of The Silver Co. public relations agency in Seattle, said he's saved between $60 and $100 per month by using Voip service from Vonage Inc., of Edison, N.J.

It lets him assign the same area code to his three employees though they work in other area codes, avoiding long-distance charges. It has eliminated multiple phone bills and "hassles with the phone company," he said. And he said using it has been "simple and painless."

That hasn't always been true -- and it still may not be, at least not for everyone.

Voip -- usually spoken as "voice over I.P." -- has long been the province of the computer nerd and the early adopter, who have prophesied its arrival as a cheaper alternative to conventional phone service. But deploying it used to require wearing a headset and sitting in front of a computer, or enduring echoes and tinny voice tones. Now, Voip technology has matured, and the sound quality is usually good, users said.

Not to mention the features: the ability to choose your own area code as a way of minimizing long-distance charges, specify call-forwarding locations for different groups of callers, schedule calls to automatically forward to an alternate number at designated times, and view an onscreen log of missed, incoming or outgoing calls.

Mix in the low cost -- perhaps as little as $30 per month for local and long-distance service, according AT&T Corp. -- and you've got a telecom technology that makes it "hard to see how, over the long run, the land-line voice business emerges successfully," wrote Merrill Lynch analyst Adam Quinton last month.

But recently, the biggest land-line companies have made it clear they'll enter the Voip market anyway, even though that may cut into their own land-line business:

Qwest Communications International Inc. earlier this week began offering residential Voip in Minneapolis and St. Paul, Minn. Spokeswoman Kate Varden said Qwest, the fourth-largest provider of local phone service, will announce new markets within its 14-state service region by mid-2004.

Verizon Communications Inc. reiterated yesterday that it plans to offer Voip services in the first quarter.

SBC Communications Inc. has started expanding Voip for businesses to cities outside its 13-state local-calling territory.

In addition to those telecoms, two other companies have recently jumped into the Voip market:
AT&T Corp., which has more than 200 business customers already using VoIP, yesterday said it plans to offer the service to residential customers early next year.

Residential trials are under way in three undisclosed states, and the nation's largest long-distance carrier said it will offer the service in at least three as-yet-undetermined metropolitan markets in first-quarter 2004.

To choose those, "we'll look at which markets have the best broadband penetration and the most college students, early adopters and people working from home," spokesman Bob Nersesian said.

Time Warner Cable, in conjunction with MCI and Sprint, this week announced plans to offer Voip nationwide in its service areas, which don't include Washington state. The cable companies are expected to compete fiercely with the telecoms for Voip business.

None of those five companies have announced pricing yet, and they wouldn't say whether they plan to offer Voip in Seattle.

The telecommunications firms do risk losing revenue if their customers jump from land-lines to VoIP, analysts said.
"They're going to self-cannibalize -- but the goal is to maintain the customer," said USB Warburg analyst John Hodulik. "So, you'd rather make less money on a given customer but keep that customer versus having that customer switch providers."

Voip uses an adapter box to break voice signals into packets of data, scatters them across the Internet and reassembles them into recognizable sounds on the other end of a call -- a far less direct route than is used by the telephone network. That's why voice quality has been poor.

Voip is cheaper than conventional phone service because it eliminates some network-access charges paid to regional carriers.

Though VoIP's voice quality is a concern, its low cost is a draw for Bob Thurmond, a Whidbey Island-based director of New York banking firm ITF Global Partners. Thurmond said he has ordered service from Vonage and expects it to be up soon. He does most of his work over the phone and the Internet, and he anticipates Voip will cut his phone expenses by about $20 a month, or 30 percent.

Thurmond, who has a telecommunications background, said, "Vonage does try to simplify everything they do, but there's a pretty steep learning curve for consumers."

One consumer experiencing that curve is Minneapolis businesswoman Kimmarie Messer, who's just learning to use Qwest's new VoIP. She said it's mainly VoIP's features, not its price savings, that attracted her, but she was a little shaky on how they work.

"I can take the adapter box with me when I travel, and I think I can use a headset in the airport. Maybe I have to plug it in somewhere," she said. "Also, you can go on the Internet to read your voice mail. Or hear it. I'm not sure."
She said the coming week "will be a really huge test."

Calling The Internet

A rapidly emerging technology, Voip (Voice over Internet Protocol), offers consumers and businesses voice phone calls over the Internet, not the telephone network.

Why would I want it?

Can be up to 20 percent less expensive than conventional phone service.

More customizable: Use the Internet and your PC to turn features on and off.

Offers features impossible with conventional service such as forwarding incoming calls to multiple numbers sequentially or simultaneously. Plus standard features such as call waiting.

How does it work?

Requires a special phone, or an adapter if you're using a conventional phone. Some companies may furnish the adapter free.

Requires high-speed Internet access through DSL or cable. That access may have to be bought from the Voip provider.

Cautions

Beware start-up fees and charges for new equipment.
Make sure you can dial 911 from your Voip phone.

Expect that voice quality may still not be as good as conventional phone service.

If your DSL or cable service goes out, so does your phone.




 
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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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