Changes for Exchanges: Internet Telephony 2000 - Internet/Web/Online Service Information

Home Office Computing, March, 2000 by Dan Costa

Thanks to both customers and competition, Internet telephony is about to go mainstream

LONG-DISTANCE PHONE CHARGES ARE among the home office's most intractable expenses. But by making calls through their PCs using Internet telephony, users not only trim costs, but gain numerous call management features. Best of all, voice quality, though still more akin to that of a cellular phone than a normal landline call, has improved greatly since the primitive PC-sound-card phones of only a few years ago.

This has led to a booming business. Market researcher Dataquest, in San Jose, Calif., estimates that the Computer telephony market--including everything from corporate call centers to home office desktops--was a $255 million business worldwide in 1998 and will balloon to $21 billion by 2003.

While so-called "voice over IP" (Internet Protocol) products are proliferating (`see "Dial `I' for Internet," November 1999, page 51), Internet voice carriers are expanding their services at a dizzying rate. Net2Phone (www.net2phone.com) claims the lead in the client-based Internet telephony market, and has upgraded its free-for-the-download software to support PC-to-PC, PC-to-phone, PC-to-fax, and voice-mail offerings.

Like competitors ranging from VocalTec (www.vocaltec.com) to Delta three.com (www.deltathree.com), Net2Phone says its goal is to make Internet telephony a competitive alternative to traditional switched phone services, not just a cheaper one--although price remains the decisive factor in this market. The company claims its 1 million users now can conduct conversations over the Net for free via its private IP network, as well as take advantage of lower global rates for PC-to-phone service.

Traditional phone companies are also embracing Internet telephony: AT&T leases international lines to Net2Phone, and Sprint is testing Net2Phone-based services in Asia. Bell Atlantic has signed a deal with VocalTec and Cisco Systems to deliver a wholesale Internet telephony service, to be resold by companies like Cybertel Communications and Mind CTI to consumers and small businesses. With so many vendors offering Internet voice solutions, home office workers will soon be able to shop around for the best rates.

Users will also be able to find Internet phones on store shelves, judging from ActionTec Electronics' (www.actiontec.com) promise to ship a $150 Chat4Less USB Phone by spring. The device will connect to your PC's USB port, then let you place thrifty Internet calls from your regular phone, plugged into the Chat4Less device. ActionTec claims the product will match the ease-of-use and audio quality of landline phones while delivering the savings of Internet telephony.

Another boost for consumer adoption of Internet telephony could come from America Online's plans to incorporate Net2Phone technology into its ICQ and AOL Instant Messaging (IM) clients, which between them boast over 75 million users. "This greatly humanizes IM's ability to communicate," says Sarah Hofstetter, Net2Phone's vice president of corporate communications.

Talk City (www.talkcity.com) sees a similar synergy between online chat and Internet telephony, offering free PC-to-PC calls for the 3 million users of its chat community. The calls are made using ZeroPlus.com's telephony software, which can be downloaded for free at user registration. The latter's portfolio of free services includes caller ID, call hold, and speed dial.

Despite Internet telephony's strides in usability and popularity, as well as its continued cost savings, not even its backers say the technology is ready to replace traditional phone service. But as more home offices switch from 56Kbps dial-up modems to broadband DSL or cable connections, voice quality will improve and online dialing will become even more viable.