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Companies try to reduce costs with online phone service

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Companies Try To Reduce Costs With Online Phone Service

April 1, 2003

By Sanford Nowlin

Until recently, making a phone call over the Internet was the domain of the die-hard technology geek or the tinkering hobbyist.

In exchange for cheap long-distance calls, one had to put up with tinny sound quality and spotty reception.

But technology has advanced, and voice-over-Internet protocol (VoIP) - the practice of sending digitized phone calls over the Internet like a piece of e-mail - is emerging as a key part of the telecom landscape.

Businesses increasingly use Voip to manage their phone networks. Long-distance carriers use it to handle international calls. And upstart telecom companies tout it as a cheap way for consumers to make long-distance calls.

"It's just the way telecommunications is evolving," said Patrick Comack, telecom analyst for Miami-based brokerage Guzman & Co.

Voip has caught the attention of mainstream consumers through small firms such as Vonage and Net2Phone that offer inexpensive long-distance calls over high-speed Internet connections.

New Jersey-based Vonage, which launched service here last month, offers unlimited long-distance calls for a $39.99-a-month flat fee.

It has aggressively marketed the service through television ads, picking up some 15,000 customers nationwide.

"This isn't a mature technology," said T. Scott Atkinson, president of San Antonio-based ICSI Consulting Services Inc. "It's still an emerging area, and there are a lot of companies on the leading edge."

Services such as Vonage's present a challenge to old-line telecom providers such as AT&T, WorldCom and San Antonio-based SBC Communications Inc., analysts said.

But those telecom giants are also making moves into Internet telephony.

SBC on Monday launched business Voip services in San Antonio to let companies carry voice traffic over their data networks and improve the efficiency of their phone systems.

Because Voip shifts voice and data to a single network, companies can set up systems that allow employees to use their phones to send and receive text messages, check inventory at another store or even keep track of the time spent on the phone with clients for billing purposes.

Only 5 percent of SBC's business customers use Voip in their phone systems, Senior Vice President Chuck Rudnick said. However, based on growing interest in the technology, it could become as common in corporate phone networks as voice mail within a few years.

"We did one of these (demonstrations) in Connecticut and had 130 people show up when there was 7 inches of snow on the ground," Rudnick said. "There's a lot of pent-up demand for information."

At SBC's product launch in a downtown San Antonio hotel, Dean Arteaga, director of information technology for Gunn Automotive Group, was ready to sign a contract to switch part of his company's phone system with an IP-based one.

Gunn is implementing Voip at its Chevrolet dealership and corporate headquarters. It eventually will roll out the service to all 18 of its stores and repair shops.

The new system will route calls to salespeople no matter where they are in the building, Arteaga said. Currently, if a salesperson moves to another desk to complete paperwork or close a sale, a call to his or her phone will ring into voice mail.

"Our No. 1 thing is letting our customers talk with our sales force," he said. "We'd like to leverage ourselves off of voice mail."

Cable providers also are charging into the Voip field - though some faster than others.

The cable industry is using the technology to provide dial tone as it begins bundling phone, Internet and cable television service. So far, Cox Cable has been the most aggressive in that regard, rolling out phone service in 10 of its markets.

Time Warner Cable, the dominant cable provider in San Antonio, is testing Voip in Portland, Maine. But it has no immediate plans to launch phone service nationwide, officials said.

"We just don't get calls from people telling us they want more choices of phone service," Time Warner Vice President Jeff Henry said. "There's just not a model today showing it's something customers are really excited about."

Voip hasn't become the telecom mainstay that, say, cell phones have. Even though consumer Voip has been available since the 1990s, analysts estimate there are only 100,000 U.S. subscribers to Internet-based calling plans.

Despite a slow start with consumers, Voip appears to have reached a critical mass with business users and telecom companies, said Danny Klein, analyst at Boston-based Yankee Group.

"We're nearing the point where those service providers who don't offer voice-over-IP are going to feel like they're being left behind," he said.

"There are some really cool services that they can offer, and they're services that can increase customer retention."

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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.

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