Just a few years ago, using the Internet to make cheap phone calls was better in theory than in practice. Connections were often crackly and had echoes, and households that traded landlines for the Internet could find themselves unable to call 911 or without service in a power outage.
Those problems haven't totally been solved, but the providers of Voice over Internet Protocol (VoIP) are trying to make their service indistinguishable from landlines. Consumers are responding enthusiastically, with 3.25 million estimated to be buying VoIP phone services by the end of the year, says researcher Yankee Group -- nearly three times as many as in December, 2004.
Certainly, you have plenty of choices. Monthly rates run from as little as $19.95 at Lingo and Packet8 to as much as $54.95 for Comcast Digital Voice (CMCSA ) for unlimited local and long-distance calls. (With most VoIP services, international calls are actually more expensive than using a calling card.) There are also activation, shipping, and modem-lease fees. Still, for a household spending an average of $53 a month on traditional local and long-distance calling, VoIP can translate into more than $300 in savings a year.
With most VoIP services, you have to install phone adapters -- modem-like boxes acting as intermediaries between a phone device and your broadband connection -- on your own or with a bit of over-the-phone tech support. With Comcast Digital Voice, you get a service call with professional installation. With AT&T (T ) CallVantage, it's a $140 option.
The beauty of VoIP is that it will generally work with your standard wired and cordless phones. Of course, you can splurge on new video-calling gear. The Motorola (MOT ) Ojo PVP-1000, for example, sports a striking futuristic design and is a great way for family members to stay in touch -- provided, that everyone in the family has one.
VoIP has lots of other cool features. Because they are Web-based services, Vonage and AT&T CallVantage can notify you of new voice messages and e-mail and send along an audio attachment. VoIP services can also usually provide you with a phone number with an area code outside of your city, state, and even country of residence. You could get a New York VoIP number so your college kids in the city can ring you up free of charge -- even though you happen to live in Florida. VoIP service providers may be able to use your existing phone number, so you don't have to call all the people you know to have them update your address book entry.
Before you join the VoIP revolution, bear in mind that most services fall short of traditional phone service in several ways. Skype Technologies, the world's most popular VoIP calling service, mainly facilitates free calls between computers, so your phone won't receive these calls when your PC is shut down unless you forward them to a regular phone for a small fee. Since VoIP operates through your broadband connection, any disruption will cut off your phone, too.
Many customers choose to retain their traditional landline for local calls and use VoIP for long distance. After all, if your neighborhood loses power, most VoIP services will go dead as well -- not the case with traditional phone service, which is supported by back-up batteries. One of few notable exceptions to this rule is VoIP service offered by cable companies like Comcast. Comcast provides a back-up battery that keeps your phone functioning for five to eight hours during power outages.
Some other VoIP services can't patch a 911 call through at all. Or, if you have a VoIP phone number with a different area code from your place of residence, the call might be dispatched to the wrong location (say, to a New York emergency center rather than to Florida, where you live). That's a big problem, considering that the number of residential 911 calls placed through VoIP will rise from 370,000 in 2004 to 3.5 million in 2006, according to Intrado (TRDO ), which provides 911 services to public safety groups and telecom companies.
U.S. telecom regulators have taken these concerns to heart. The Federal Communications Commission has set a Nov. 28 deadline mandating that all service providers aiming to displace traditional phone service give emergency-response workers the names and locations of their subscribers. This rule does not apply to outfits, like Skype, offering mostly PC-to-PC calling.
You might also run into problems if you have a home security system. VoIP may not work with your alarm set-up, so you might ask your security company to tune your system or even install a cellular back-up system. That could run up charges of $200 for the installation and $10 extra in monthly payments.
Clearly, VoIP is a young technology, with lots of technical and regulatory knots still to be worked out. But it has a lot to offer: increasingly crisp call quality at a low price, with features traditional phone service providers often lack. Since most providers let you sign up without locking yourself into a one- or two-year contract, VoIP may be worth a try.
By Olga Kharif