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Internet Phone Tries to Go Prime Time

Posted on: Sunday, 18 September 2005, 15:00 CDT

Sep. 18--Internet phones are calling the masses. But the masses aren't taking the call -- at least not yet.

The biggest names in Oregon telecommunications -- Qwest, Verizon and Comcast -- all now offer phone plans using Internet technology, helping to bring a once-obscure service to the mainstream. Known formally as Voice over Internet Protocol, or VoIP, Internet calling could someday make all calls as cheap as e-mail and replace the telephone as we know it.

Techies have long used their computers as phones, rigging them to circumvent traditional phone lines and make toll-free calls over the Internet. Upstart services such as Vonage and Lingo soon adapted the technology to work with regular phones, charging bargain rates under $30 a month for unlimited local and long-distance service.

VoIP prices from such big telecom companies as Qwest and Verizon aren't nearly as good, though, because the carriers don't want to undercut their core business. And though Internet callers no longer need to be computer whizzes to set up and use VoIP, it's still trickier and buggier than a regular phone.

So while Internet calling may be a great deal for technical savvy people who make lots of long-distance calls, for everybody else the deals may not yet be good enough -- and the service not simple enough -- to be worth the trouble.

"Honestly, people just want to pick up the phone and use it," said John Breyault, researcher for the Telecommunications Research & Action Center, a consumer advocacy group in Washington, D.C.

"You have to understand that regular landline phone technology is something people have gotten very comfortable with."

Old-fashioned phones convert voices into electrical impulses. It's a 19th-century technology that, at its most basic, requires only two phones, a copper line and electricity.

Internet calling uses computer technology to turn voices into data and route them across sophisticated telecom networks the same way e-mail moves around the Internet.

Because data takes up far less space than voices on telecom networks, it's much more efficient -- and less expensive -- for phone companies to carry VoIP calls than regular phone calls. Additional features such as voice mail, caller ID and call-forwarding typically come free, instead of costing several dollars a month extra the way they do with conventional service.

Internet calling is taking off as more households sign up for broadband Internet access -- usually a prerequisite for VoIP -- and as mainstream companies like Qwest Communications International Inc., AT&T Corp. and cable giant Comcast Corp. roll out their own versions.

Forecasters expect the number of U.S. households with Internet calling will triple this year -- to nearly 3 million. In 2010, Forrester Research predicts, there could be 12 million homes using VoIP.

Even at that, though, roughly nine in 10 households would use plain old telephones.

Sheri Flynn's experience helps explain why.

When Flynn's sister told her about a cheap long-distance plan from AT&T last spring, the Beaverton homemaker called the phone company to sign up. But AT&T is backing out of the long-distance business, and Flynn said the company talked her into trying its VoIP plan instead.

What Flynn wanted was cheap long distance after a smooth switch she wouldn't notice until lower prices showed up on her monthly bill. What Flynn got was a box called a router that came in the mail, along with instructions on connecting her phone to her Internet.

"They sold me something I didn't understand," Flynn said. "I'd never heard of VoIP. They didn't even use the term."

Gamely, Flynn tried to hook it up. But AT&T's service seemed harder to connect than the company suggested, and Flynn said she puzzled for days. She eventually solved the installation conundrum, but her VoIP didn't work with her old telephone or her home's phone jacks. She bought a new telephone and a 50-foot cord to run from her computer to the room where she wanted the phone.

Then her VoIP service stopped working, Flynn said, and she spent hours on her cell phone with AT&T technicians restoring the connection. Even then the sound quality was erratic, she said, and she found out her VoIP didn't work with her home alarm or when the power was out.

After two months, Flynn gave up, cutting off her new service and switching back to her regular phone.

"My advice to consumers is wait it out," Flynn said. "Don't be on the bleeding edge."

Internet calling turned out to be totally wrong for Flynn. But it's exactly right for Jon Berg.

Berg's wife, Marcia, is from Brazil, and the Beaverton family spends hours talking to her friends and relatives in South America. Billed at standard rates, such calls cost upward of $1.50 a minute. Cheaper international rates often come with a monthly fee around $4 a month, on top of local and domestic long-distance charges.

Surfing the Internet, Berg happened across an ad for a VoIP service called Lingo, which offers local phone service and unlimited long-distance calling in the United States and parts of Europe for a little more than $20 a month. Calls to Brazil are 6 cents a minute.

He and his wife were wary of Internet calling, Berg said, but they had no trouble setting it up, and they love the cheap rates they're getting to call Brazil.

Sound quality can be spotty, especially when Berg's home Internet connection is on the fritz. The service doesn't work if the power's out, but he has a cell phone as a backup. And Berg, an elevator technician, figured out how to rewire his phone lines so that his VoIP service connects to his home's regular phone jacks.

"Is the general public ready for this right now? I would have to say no," Berg said. "But I think they should be thinking about it."

There are a lot more people like Flynn than the Bergs, which suggests just how much better, and cheaper, VoIP will have to get before it really takes off.

Big phone companies such as Qwest and Verizon are in the best positions to popularize VoIP. With established customer bases, and armies of sales and service personnel to make sure it works right, they could spread VoIP.

But such companies are likely to resist heavily promoting Internet calling to consumers, said Maribel Lopez, analyst with Forrester Research. They offer VoIP to stay in the game with such upstarts as Vonage and Lingo but keep prices high because they don't want to sacrifice hefty revenues from regular phones.

"The telcos aren't dying to cannibalize their own service," Lopez said.

They may not have a choice.

Competitors outside the traditional phone business are using VoIP to steal customers from established carriers. VoIP specialists Vonage and Lingo, for example, offer rates $10 to $30 better than Verizon and Qwest.

Last week, the VoIP grab for telecom consumers heated up further.

Online auction company eBay Inc. said it would pay at least $2.6 billion for a Luxembourg-based VoIP startup called Skype International. Skype's software transforms any computer with a microphone and speaker into a phone that can make free calls to Skype-equipped computers anywhere. (Customers who want to use an actual telephone pay.)

Cable operators, though, may eventually be the ones to drive Internet calling into homes by making it work more like regular phones.

Cable giant Comcast, which stepped up marketing its new service over the past few weeks, provides its VoIP subscribers with battery packs that can keep the phone working for several hours during blackouts. Comcast ties the service into a home's existing phone wiring and touts its friendly name, "Digital Voice."

A relative latecomer to VoIP, Comcast debuted its VoIP service in the Portland area in June. At nearly $55 a month for unlimited calling, Comcast's VoIP service is among the most expensive -- but it offers $15 discounts to customers who also subscribe to cable TV and high-speed Internet.

If Comcast lowers prices on its package deals, Forrester's Lopez said, it will draw more customers.

Ultimately, Lopez said, companies such as Comcast could profit from the efforts of VoIP's pioneers.

"The people like Vonage have done a great job marketing their own service so folks like Comcast can come in and grab the customer," she said.

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Source: The Oregonian

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