VOIP: lower phone costs on Net

Say hello to lower phone costs on Net

Internet calling has improved so much and become so inexpensive, it's a good time to try some of the services
By James S. Granelli, Los Angeles Times Staff Writer
The cost of phone calls has been dropping for years, but there's still a lot of room to push prices down to pocket change -- if you're not afraid to make calls through your computer.

A growing number of calling services take advantage of the technology known as voice over Internet protocol, or VOIP. Thanks to continuing technological improvements, the plans are easier to use than ever and can save you a boatload of money on long-distance and, particularly, international calls.But don't rely on the plans as your only phone service: Most don't provide emergency 911 calling, and there can be other drawbacks as well.

You might not know it, but you're probably already using VOIP: It's the same technology that AT&T Inc. and Verizon Communications Inc. use to handle your long-distance calls, and it's the backbone in the so-called digital-calling plans offered by cable TV giants like Comcast Corp. and Time Warner Cable Inc.

The cost savings of VOIP has allowed upstart phone-based firms, including Vonage Holdings Corp. and Packet8, to compete against the big players, even though they don't own the lines to your home.

VOIP technology breaks up voice into data packets and sends it, like e-mail, over high-speed lines without the need for a lot of expensive hardware that phone companies use.

Scores of computer calling operations -- Skype Ltd., SightSpeed Inc. and Gizmo Project among them -- don't think those entrenched phone companies are passing the true savings of VOIP on to consumers.

And such companies as Mobivox Corp. and ISkoot Inc. believe that's especially true in the higher-priced mobile-phone industry, so they are bringing the same free and low-cost calls to cellphones.

"Costs of calling are dropping to free," said Andy Abramson, an industry and marketing consultant who has tested all the major VOIP operations.

Consumers might pay a basic access charge -- "an admission fee," Abramson called it -- for a connection or a basic calling plan, but they don't have to pay more just to talk to someone around the corner or around the world.

Neal H. Shact, chief executive of telephone services company CommuniTech Inc., recalled a visit to Paris two years ago when he spent $1,000 on cellphone calls.

"Two weeks later, I went to Sweden and used Skype through my laptop for even more calls and I didn't spend the whole $12 I had paid for," he said.

But the VOIP companies are businesses too and have to make a profit to continue offering service.

They typically make their money by selling extras, such as voice mail, extended voice and video recording, and international and nationwide calls to nonmembers.But even those prices are low: $30 a year for Skype customers to reach any number in North America and about 2 cents a minute for most providers to reach home phones in many countries.

The growing popularity of the programs has helped persuade two mainstream cellphone carriers -- T-Mobile USA Inc. and Britain's Mobile3 -- to create ways to let customers make calls and send messages without using their minutes.

T-Mobile uses software that links to high-speed Wi-Fi networks for free calls, messaging and data, and Mobile3 joined Skype on a new phone to allow free Skype-to-Skype calls on the cellular network as well as unrestricted Skype Chat messaging.

"All of these services give you a glimpse of what we are capable of doing if those who control the high-speed pipes into our homes aren't limiting access to what we want to use," said Marcelo Rodriguez, CEO of Voxilla Inc., a San Francisco company that provides information on Internet technologies.

For computer phone plans, the costs are so low that it's worthwhile to play with a number of them to see how they can cut your long-distance and international bills.

And with Skype, SightSpeed and a few others, free video is thrown in, as long as you want to sit in front of a computer and a webcam.

Setting up the calling programs is usually easy.

For the most part, you need only what many folks already have: a computer, an Internet connection and a headset with a microphone. Depending on the service, you might not need the computer or the headset once the programs are set up.

Skype, SightSpeed, Gizmo and others can be downloaded free from their websites. You'll have to register a user name and a password, much like you do for online banking and other services.

Some drawbacks

Sound quality can fluctuate from excellent to so-so, and calls can be dropped, albeit far less than with cellphones.

If you're looking for free calling, you'd better get your friends and relatives to use the same program you're using because nearly all of them allow free calling only among members.

Some drawbacks may be more in the eye of the beholder. If you spend a lot of time in front of the computer, then it may not be much of a stretch to use it to make a call.

If you have a laptop, you can take your calling plan with you. Computer-based calling plans usually don't offer mobile service. For that, you need programs like Mobivox and ISkoot.

If you want to see your grandchildren across country, then you'll be happy to sit by the computer as you talk to them and watch them. Video also can be used with a webcam on a laptop to walk around a house and show relatives -- or prospective buyers -- what it looks like.

But with some exceptions, video quality is poor. SightSpeed has won awards for its delivery, and Skype is close behind. Other services can give the impression of old-time movies: You hear "hello" well before you can see a grainy hand waving at the other end of the connection.

Other drawbacks to computer calling plans come with the high-tech territory. Voice is, after all, a program, much like Microsoft Word and Adobe Acrobat, so glitches can occur.

Some employers may have firewalls that block workers from using the programs at the office. And getting help can be difficult: Most companies don't even have a phone number to call for tech support, leaving you to the mercy of online forums, chat rooms and help sites.

Growing market

Though VOIP has been around for a few decades, the founders of Skype Technologies, now owned by EBay Inc., gave it mass appeal four years ago. The world's most popular Internet calling program says it has an average of about 10 million users online at any time and 30 million to 40 million members who use the program daily.

The overall VOIP market just for cable TV companies and independents like Vonage soared from 6.5 million households in mid-2006 to 11.8 million at the end of June, representing more than 10% of the total telephone market, according to TeleGeography Research. By the end of the year, phone-based firms should have 15.2 million customers.

TeleGeography estimated that Skype alone has 17.8 million registered U.S. subscribers, about 5.3 million of whom are active users. Free Skype-to-Skype calls accounted for 28 billion minutes of talking, half of which were international calls, and the operation handled 4.1 billion minutes of paid Skype-to-phone calls worldwide.

"There's no question that Skype is moving a ton of calls," said Stephan Beckert, research director at TeleGeography. "But the incumbent phone companies shouldn't lose any sleep over it. There were 300 billion minutes in total of cross-border traffic in the industry this year."

Though Skype and similar services aren't threatening the major phone and cable companies yet, they are "pointing to the direction of future phone service," Beckert said.

Shact of CommuniTech agrees, saying, "Skype really was a game changer."

The key? It was simple to install and easy to use. And it introduced the concept of free calling worldwide.

Through numerous upgrades, Skype remains one of the easiest programs to install and use. Just go to the company's website and download the program for either Microsoft or Apple operating systems. Create an account with a user name and a password, and you're ready to make calls.

You can use the program to search for friends and family already using Skype, or you can buy credit online and make calls to conventional phone lines here or abroad.

SightSpeed, Gizmo and others work similarly.

Jonathan Bernstein is such a big fan of SightSpeed that he's now a beta tester with ideas on how to develop the program for business use.

Bernstein signed up this year to call his son in Florida but wound up instead using it more for his Sierra Madre-based crisis management firm, where it has become a videoconferencing tool that lets him train clients and provide other help. SightSpeed can replace expensive conferencing hardware, he said.

"In a crisis, all the written words you put out in press releases are not as good as an effective speaker who can be seen in a video right after a crisis hits," he said.

Rates for calls

For basic calling, there are no "gotchas." The programs won't let you use services that cost additional money without prompting you to buy credit first.

But you still have to be on the lookout, especially for the costs of calling folks in other countries who are using conventional phones. The sites typically have a detailed list of how much you'll pay.

Though rates may start as low as 1.9 cents a minute to land lines in Canada, China, Germany, Britain and other developed nations, they are much higher elsewhere. Gizmo Project, for instance, charges 33.4 cents a minute for a call to land-line numbers in Afghanistan.

You also have to be careful about calling cellphones in foreign countries, most of which charge the calling party for the entire cost of the call. In the U.S. cellular world, the caller and the person being called share the costs. VOIP calls reflect those rates.

SightSpeed, for instance, charges 2 cents a minute for calls to U.S. and British land-line numbers and to U.S. cellphones, but the price for calling a cellphone in Britain is 22 cents a minute.

Those international cellphone calls are where Mobivox, ISkoot and a host of others -- such as Jajah Inc., Raketu Communications Inc., Rebtel, TalkPlus Inc., Jangl Inc. and Jaxtr Inc. -- can make a mark.

A few, particularly ISkoot, work mainly with smart phones, those more-expensive business-oriented handsets like BlackBerrys that are gaining fashion with consumers. That's mainly because you need a cellphone that allows you to download needed software.

But Mobivox, Jajah and others can be used with most cellphones or land-line phones.

Los Angeles resident Angela Choi said she used Mobivox regularly to call her boyfriend in Toronto.

"My phone bill used to be $400 a month, and now it's down to $100," she said.