Slashing Overseas Phone Bills

Some American entrepreneurs have discovered both a powerful new exporting tool and an unusual product to export.

The product is US telephone rates - cheap phone rates, to be precise, and the tool is the Internet.

Americans enjoy some of the lowest telephone rates in the world, usually paying far less to call abroad than most Europeans and Asians pay to call the US.

American businesses have, for years, capitalized on technology that gives US phone rates to overseas callers.

Now, USA Global Link, a Fairfield, Iowa, telephone company, says it will deploy Internet-phone technology in major cities of 14 countries, plus the United States, this spring.

Other telephone companies already use the Internet to allow computer users to call around the world. But USA Global Link's system allows anyone to make Internet-directed calls without a computer.

"It's virtually transparent to the consumer," says company spokesman Mark Petrick.

The calls will save 80 to 90 percent over traditional international calls to the US.

For example, a Berliner calling New York using Germany's monopoly carrier might pay 75 cents a minute during business hours, Mr. Petrick says. With Global Link's current service, that price would fall to 35 cents.

The rate will drop to 15 cents a minute, he says, with the company's Internet service.

Quality poses a big problem with Internet-based phones. Voice clarity diminishes. And delays in the global computer system can make it hard to know when the other person has finished talking.

USA Global Link claims to have fixed these problems. Better technology converts voice signals into digital packets of data and squeezes them into smaller, more manageable sizes.

The company provided scant technical details about its system, but if its claims hold up, it would represent a breakthrough in Internet telephones, analysts say.

"That would be impressive," says Pat Hurley, a telecommunications consultant and author of "Internet Telephony for Dummies," published last year. But "I'd have to hear it for myself."

Even without the Internet, another type of service, call-back companies, represents a growing challenge to the world's telephone monopolies.

Especially in developing nations, government-owned telephone companies often earn large profits from high rates for international calls.

The call-back services circumvent these monopolies. Here's how.

A customer in Hong Kong would dial a special number in the US, then hang up after a couple of rings. That call carries no charge.

But it registers with a call-back company's computers, which recognize the customer's number in Hong Kong and immediately call it back.

When the customer answers the phone, he or she hears a US dial tone and makes what amounts to a domestic, US call - at cheaper, US rates: about 35 cents a minute versus about $2 a minute for Hong Kong Telecom.

The business is still small compared with the multibillion-dollar telecommunications industry. Last year, the International Telecommunication Union (ITU) in Geneva estimated call-back revenues at $500 million - $1.2 billion by 1998.

But the impact of call-backs stretches beyond revenues.

Some countries, such as France, have responded with dramatically lower international rates.

More rate reductions are expected next year as the European Union opens its telecommunications industry to competition.

Other countries take a less competitive stance. Twenty-five received ITU permission last year to outlaw call-back services.

"Everybody is concerned," says Kohei Nyshioka, manager of international services at IDC America, the US arm of a Japanese international phone company. "They're just going to grow more and more."

If call-back services overcome quality problems, Internet calling threatens another hole in telecommunications monopolies.

USA Global Link will roll out its Internet-based service in major US cities in the US, plus Germany, Japan, Brazil, Hong Kong, Britain, France, South Africa, Australia, Indonesia, South Korea, Chile, Belgium, Luxembourg, and the Netherlands.

Then it plans a $500 million expansion.

Finding the Deals

If you have friends or relatives abroad who often call the United States or another country, here's how they can cut their phone bills:

Call-back services (where a caller in a high-cost country is called back from a low-cost country) can give them access to cheaper rates.

You can find a list of these carriers on the Internet (www.analysys.com/vlib/reseller.htm). Typically, these carriers also advertise in newspapers and magazines in foreign countries.

Some companies also offer computer users the opportunity to dial anyone long-distance using the Internet at significantly lower cost than even US phone rates.

Two such companies, Global Exchange Carrier Company (www.gxc.com) and IDT Corp. (www.net2phone.com), offer free trials.

The next wave? USA Global Link (www.usagl.com) claims it will offer a breakthrough technology in the next two months that will improve quality and allow even non-computer users to use the Internet to make calls.