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Telephony Market Catches On, As Calls Come Via Internet


Vonage In Print News

Tacoma, Wash., Telephony Market Catches On, As Calls Come Via Internet

April 5, 2004

By Marcelene Edwards

High-speed Internet access is making telephone calls a lot cheaper and providing more fancy features.

Some consumers are already paying just $35 a month or less for unlimited calls to anywhere in the United States.
They also get free voice mail and free caller ID. Under some plans, you can keep your current number. And voice mails can pop up in your e-mail inbox.

The technology -- called Voice over Internet Protocol, or Voip -- uses the Internet to send telephone calls. It's beginning to replace traditional telephone services in homes and businesses around the country, including the South Sound.

Voip uses regular phones connected to a broadband line such as a cable modem or digital subscriber line. The conversation is broken into pieces and put back together at the other end of the call. Once the service is installed, it's as cheap as sending an e-mail.

Telecommunications, cable and Internet companies are beginning to roll out these services -- betting that consumers will be seduced by the cost and new features.
South Sound residents already can get the Internet phone service from a handful of small businesses on the cutting edge of VoIP. Offerings from telecom giants AT&T, Qwest and Comcast are coming later this year.

The service is becoming more and more attractive as consumers and businesses adopt high-speed Internet lines necessary for VoIP.

Low-cost phone service is one of the main reasons consumers and businesses switch to making calls on the Internet. Auburn resident Frank Mansell switched his home phone from Qwest and IDT to New Jersey-based Vonage two months ago.

"We ended up going to them because of our long-distance calls to Canada," said Mansell, a 49-year-old public relations counselor. "It was a flat rate, and it was cost-effective."

Mansell pays $34.95 for all his local and long-distance calls through Vonage. He estimated that he saves at least $35 a month, but the Internet phone service hasn't been as good as his old phone company's service. Echoing and interruptions are problems.

"I am pondering whether it will be worth it or not," he said. "I'm going to stick it out for a few more months."
Businesses also are switching to Internet calls to save money.

The Metropolitan Development Council in downtown Tacoma switched to Voip two years ago. Information technology director H.T. Potts said he saves about $2,000 a month.
"We love it," he said. "It's a little bit bleeding-edge technology. There have been some problems, and there have been some downtimes, but the cost savings is there."

Potts said he paid about $75,000 for the equipment he needed for 130 phones in seven locations -- much more than the $35,000 it would have cost for a traditional phone network.

But after the equipment is paid for, it's worth it, he said.
Analysts and industry experts still consider the technology to be a novelty. They predict it will be a few years before it has wide appeal.

"Whilst it is likely that Voip will predominate at some time in the future, it will remain a niche application through 2004," according a telecommunications report from consulting company Deloitte Research Technology, Media and Telecommunications.

Features not available on traditional phone lines will be part of what drives acceptance of Internet calls, said Steve Kipp, Washington state Comcast spokesman.

The cable television provider will bring Internet calls to the Puget Sound sometime in 2005.

New features will make it better than the phone service that the company already offers, Kipp said. Consider:

  • Your in-laws are in town for the weekend, and you could get a separate phone number just for them.
  • You could give a teenager a phone number that could be used at certain times of the day.
  • Phone messages could come over your television set and your e-mail.
  • Video phone could become a reality.

    Right now, Comcast is testing the technology in a few communities in the eastern United States, including Coatesville, Pa., Indianapolis and Springfield, Mass.
    Comcast in 2002 gained access to millions of homes through the AT&T's cable networks. AT&T already was offering phone service through the cable lines, but consumers were slow to accept it. Comcast moved its focus to fixing problems with its primary product -- cable television.

    "Comcast wanted to focus on the core of the company," Kipp said. "We decided to not come out with a phone product until Voip technology was ready for prime time."
    Traditional telephone companies across the country are working on Voip products.

    Qwest, Verizon and SBC Communications have announced new services. Executives for the phone companies say they need to offer what consumers want to keep them as customers.
    Qwest customers already are demanding that the telecommunications company provide Internet phone services, said Joe Glynn, vice president of Internet protocol products.

    "This is what they are asking for, and we certainly believe in providing our customers with a lot of choice, so we are rolling these services out," Glynn said.

    The service will connect a regular phone and a broadband connection. Subscribers will be able to see a list of their calls and voice mails on a screen.

    "We recognize that (VoIP) is where our industry is going," Glynn said.

    If Qwest offers the service, then customers will be less likely to leave for other Internet phone providers. Keeping customers means maintaining revenue.

    And there's another financial advantage. Using the Internet to make phone calls is a lot cheaper for telecommunications companies than phone lines.

    "Telecommunications is very expensive," said Kevin Teare, chief executive of California-based Santa Cruz Networks, which offers Internet services.

    "Installing a phone line has to be something you do at every desk. The infrastructure is incredibly expensive. Voip is significantly cheaper. Our business has very healthy margins -- higher than 90 percent."

    One of Santa Cruz's customers, Think3, has 23 locations around the world, including one in Seattle. This year, when Think3 did its worldwide employee kickoff, all 365 employees were on the same call for four hours. That's 4,400 minutes on the phone.

    With a traditional phone line, that call would have cost about $20,000. But using Santa Cruz's conferencing service, the company paid $6,000 for a month of unlimited conferences.

    VoIP's new technology has presented regulatory problems.
    Companies that sell Internet phone service do not pay fees to local phone companies for connecting a long-distance phone call -- as AT&T does when putting a call through to Qwest.

    Some phone companies have gone to court to recover the fees.
    "Paying the fees would cause our service to be more expensive," said Jim Carden, founder and CEO of Portland-based LocalDial, which offers phone service to Pierce County homes.

    "We buy local business lines in each of the areas where we need local numbers," he said. "We pay both standard fees as well as state and federal taxes. We do not pay access fees, which (are) typically charged per minute."

    That stance could mean the loss of millions of dollars to local telephone companies and to state and federal funds that pay for services such as phones for low-income families and Internet service in libraries and schools.

    A group of smaller telephone companies in Washington -- including CenturyTel, which serves Gig Harbor and other areas around the South Sound -- sued LocalDial last year, saying the company is skirting charges that include the universal service fee, a carrier common-line charge, traffic-sensitive access charges and other fees.

    "They are attempting to use the network without paying for it," said Tim Grigar, general manager for CenturyTel for Washington and Oregon in Gig Harbor.

    The Federal Communications Commission and the Washington Utilities and Transportation Commission are grappling with this issue.

    Staff members at the state commission recommend that commissioners direct LocalDial to pay for its use of the public telephone networks. That would mean consumers would have to pay more for Internet phone service.

    VOICE OVER INTERNET:

    QUESTION: What is Voice over Internet Protocol?

    ANSWER: Voip allows users to make telephone calls using a computer network. It converts the voice signal from a telephone into a digital signal that travels over the Internet, then converts it back at the other end. Users hear a dial tone and dial just as they always would.

    Q: How can I place a Voip call?

    A: Some services connect a traditional phone to an adapter that plugs into an existing high-speed Internet connection. The call goes through the local telephone provider to the Internet. It is then sent to the receiving party's local telephone company for completion of the call.

    Q: What kind of equipment do I need?

    A: A broadband connection is required. This can be through a cable modem or high-speed service such as DSL or a local area network. You can hook up an inexpensive microphone to a computer and send your voice through a cable modem or connect a phone to an adapter.

    Q: What are some advantages to the service?

    A: Some providers offer features and services not available with a traditional phone, such as getting voice-mail messages through your e-mail. If you have a broadband Internet connection, you don't need to pay the additional cost for a line just to make phone calls.

    With many plans, you can talk for as long as you want with any person in the world for no extra charge.

    Q: What are some of the disadvantages?

    A: Some Internet voice services don't work during power outages. It might be difficult to seamlessly connect with 911. The service might not offer telephone listings.

    This story also appeared in:
  • Miami Herald, 4/6/04



 
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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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