Long Distance Free - Internet telephony

Kiplinger's Personal Finance Magazine, Nov, 2000 by Ronaleen R. Roha

TECHNOLOGY -- NET PHONING isn't perfect, but you can't beat the price.

SHE LOVES calling her friends, but Diane Meckel hates long-distance charges. At least she used to. Now Meckel uses her computer and a service called PhoneFree to talk as long as she likes without paying a penny for long distance. PhoneFree is one of a growing number of Internet-telephony companies that offer free long-distance calling to any phone, wired or wireless, in the U.S. and, in some cases, Canada.

The Slatington, Pa., woman is pleased with the overall quality of her PC-to-phone calls, even if a call breaks up or is dropped now and then. She is especially pleased with the $50 to $70 she saves every month in long-distance charges--and that doesn't count calls made to friends in Australia. One half-hour call down under used to set her back $48. But now she talks for hours because PhoneFree, like many services, allows anyone in the world with a PC and Internet connection to make free calls to any phone in the U.S.

Free, yes, but with some strings attached. Most net-phone firms lure you to their service with free long distance in hopes that you will eventually use their other Internet and telecommunications services, such as international long distance (for which you pay, but at rates way below those charged by the regular carriers), e-mail, voice mail, faxing and video conferencing.

A few years ago Internet phoning was limited to calls placed from one PC to another PC that had the same phone-calling software. Now that you can place calls from your computer to people who don't own a PC, interest in net phoning is expanding. Jeff Pulver, an independent analyst, estimates that there are 15 million net-phone users in the U.S. today, up from just five million a year ago.

How clear?

SO HOW GOOD are free Internet phone calls? To find out, we tested three major PC-to-phone companies--Deltathree, Dialpad and PhoneFree--plus the free service recently added to MSN Messenger, Microsoft's instant-messaging service. Our conclusion after dozens of calls: Although the call quality is still not as good as conventional long distance, these services come close.

In our tests, the services were fairly well matched, although MSN Messenger's was often better than the others. Nevertheless, with each service provider, reliability and consistency varied from call to call and sometimes even during a single call. On rare occasions, calls deteriorated so badly that we had to hang up and call again. Even so, a number of calls came close to ordinary long-distance quality, and most were at least as clear as a good wireless-phone connection.

Although you wouldn't want to negotiate nuclear disarmament on a net-phone call, Internet calls are quite secure, says Noam Bardin, president and CEO of Deltathree. It's easier to listen in on a wireless phone call than a net-phone call, he says.

So, what's the catch?

THE CATCH DEALS with how you feel about privacy. Internet phone services make their money from posting advertising on the computer screen while you're talking, and they ask for some demographic information when you register so they can send ads that match your interests. They may ask for your age, income level, whether you own or rent your home, what kind of car you drive, and whether you already own or are planning to buy certain products and services in the next year. Of all the services, MSN Messenger requires you to supply the least amount of information.

We felt that the ads were not obtrusive because--sorry, advertisers--we don't stare at the screen while talking. As for the demographic information, just make sure to read the privacy policy before signing up, to see what the service plans do with it.

A number of factors will affect how good your net-phone experience is, including unknowns such as the degree of congestion on the Internet when you dial. But you can improve your chances by installing the right equipment. For starters, almost anyone with a PC that runs Windows 95 probably has all that's required. In general, the faster your PC's processor, the better for net phoning. Some services require a Pentium-speed processor of at least 100 MHz. (For now, Macintosh users are out of luck because net phoning doesn't work with Mac technology and is only hit or miss with software that lets Macs emulate PCs.) You will also need:

* A sound card, preferably a full-duplex card that permits both parties to talk at the same time, just as you can during a traditional phone call. A half-duplex card robs you of a phone-like experience because only one person can talk at a time, as if you were using a walkie-talkie. During setup the system will probably tell you whether you have a half-duplex card. You can buy a decent full-duplex sound card for $40 to $50. Tech adventurers can install it themselves.

* A headset with a built-in microphone. You can use a microphone and speakers, but a good headset is the easiest way to improve call quality because it helps eliminate echoes caused by feedback from the speakers. You can get a good headset for about $20 to $30.