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Dialers' New Choice

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VoIP Options Answer the Call: Personal tech columnist Rob Pegoraro weighs in on Internet telephony services. (July 18, 2004)

Cable companies also promise superior quality because calls never go out on the public Internet. Instead, they travel over the cable companies' private data networks until they are handed off to other telecommunications companies.

But cable also has some kinks that still need to be worked out. Cablevision customers, for instance, have to go to another provider for international calling. Comcast Corp., the nation's largest cable company, is still experimenting with the technology and has not made a firm commitment to rolling it out to its customers.

Telecommunications companies are lobbying the federal government to allow Internet voice services to remain unregulated, but there is still a tangle of issues that complicate a move from traditional telephone technology to Internet-based service. The Justice Department is worried that it won't be able to monitor Internet telephone calls in the same way that it can tap traditional voice calls. There are also ongoing concerns about linking Internet-based phones with the emergency 911 system. And regulators worry that a move to Internet phones will upset a complex system of subsidies that ensures that rural and low-income citizens have telephone service.

But as those details are hammered out, dominant phone companies are growing increasingly concerned about the upstart technology. Well aware that long-distance companies such as MCI and AT&T were devastated by a sudden influx of competition, Verizon and the other major local phone companies are watching warily as Internet phone services slash prices and vie for market share.

Vonage is the phone service that Sternoff in Brooklyn uses. It's a start-up firm that offers unlimited local and long-distance calling over the Internet for $29.99 a month. It's one of several that have popped up during the past several years (see Fast Forward, Page F7).

After AT&T launched its $34.99-a-month CallVantage service three months ago ($19.99 for each of the first six months), Vonage cut its monthly price from $34.99. Last month, McLean-based Lingo.com launched a similar service that offers three months of free calling for users who sign up for its $19.95 Lingo Unlimited package (there's also a 500-minute package for $14.95). Lingo requires a $29.95 initiation fee but the Unlimited plan includes calls to Western Europe.

Cablevision is marketing its package of local, long-distance and high-speed Internet access for $90 a month.

The sudden interest in Internet-based phone technology is spurred in part by the growth of high-speed Internet connections. According to a recent study by the Federal Communications Commission, approximately 25 percent of all U.S. homes now have a high-speed Internet connection, a development that gives companies the critical mass they need to market their services to millions of homes.

The technology is also catching on with some of the nation's largest corporations, including Boeing Co., which is the process of moving its 157,000 employees to Internet-based phones.

For corporate America, the cost of leasing Internet lines has fallen dramatically. Five years ago, a dedicated data line that stretched from New York to Los Angeles cost an average of $150,000 a month. But that was before a host of telecom companies rushed in to build parallel networks, creating a glut of capacity and driving down rates. Today, that same line costs less than $15,000 a month to lease.

In Herndon, William Ashton estimates the Internet phone service has cut the town's average monthly phone bill from $15,000 to $10,500, a 30 percent saving.

Ashton sees other benefits of Herndon's new phone system as well. It is helping employees manage the deluge of e-mail and voice mail. Voice messages are encoded and sent to desktop computers as e-mails. When Herndon town employees want to listen to a message, they open the e-mail and the voice of the caller can be heard over the computer's speakers. They can forward the voice mail to a colleague with a mouse click. Away from the office, employees who dial in to their voice mail have the option of listening to a computer-generated voice read their regular e-mail.

While Internet phone services with all the bells and whistles are cheaper than traditional phones, it is also possible to make calls over the Internet for free. Companies such as Free World Dialup allow users to download their Internet phone software for free. However, users are limited to calling other Internet phone users.

But the technology still has a long way to go before it becomes more than a blip on the radar screen of the nation's telephone system. Vonage, the largest of all the Internet service providers, has just over 200,000 customers. Cable companies have only begun to offer the service and have not released any subscriber data.

Kevin Calabrese, a telecommunications analyst with Argus Research, said that as the technology improves, customers eventually will feel comfortable cutting their ties to the traditional phone networks.

"It's the largest trend going forward over the next decade," Calabrese said. With competitors already cutting prices, regional giants will be forced to do likewise to compete. "Yes, there will be smaller margins, but they don't lose a customer," he said.

But they had better hurry, because people like Abramson are eager to cut their ties to those old-fashioned copper wires.

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