Why the Web may replace your phone

On the fringe for more than a decade, a cheap, flexible Internet-based phone service is poised to take off.

VoIP. Pronounced "voip," it sounds as silly as it looks. But in the world of telecommunications, it's becoming a serious business that could change the way you make a phone call.

Rather than depending on telephone lines, VoIP - or Voice over Internet Protocol - would allow you to use the Web. It might pave the way for a new, more flexible wireless service. And it's cheap: You could reach Nanjing for the price of calling next door.

It's "probably the most significant paradigm shift in the entire history of modern communications, since the invention of the telephone," Michael Powell, chairman of the Federal Communications Commission, said earlier this year.

Although the technology has been around for more than a decade, it now looks poised for rapid growth, attracting the biggest players from both the cable TV and conventional phone industries, companies with names like Cox, Time Warner, Verizon, Qwest, and AT&T. In July, aerospace giant Boeing, which has some 157,000 employees and offices in 70 countries, announced it would use VoIP to handle all phone calls within the company.

The rapid move of such big brand names into the market is a validation that VoIP is for real, says Philip Solis, a senior analyst at ABI Research, a technology research think tank in Oyster Bay, N.Y. "This market is starting to heat up."

By 2008, about 17 percent of all phone lines in North America will be VoIP, according to one estimate. Businesses may adopt the technology even faster than consumers. The Radicati Group forecasts that worldwide corporate phone lines using VoIP will jump from 4 percent today to 44 percent in 2008.

The attractions of VoIP are obvious: much lower cost and myriad features that enable users to filter, block, save, and redirect incoming calls. Proponents argue that some of the traditional drawbacks - voice quality, reliability, and the inability of a 911 operator to track a caller's location - are quickly fading.

By weaving VoIP with another hot technology - Wi-Fi - users may soon be carrying it in their pocket or purse in the form of a dual-system handset, a portable phone that would leap seamlessly between cellular and Wi-Fi connections as it chooses the best signal or lowest cost.

Richard Tworek is a believer in VoIP, both at home and at work. For $20 a month ("I'm a cheap guy," he says) he uses a VoIP service to talk by phone for unlimited minutes throughout the United States, Canada, and Europe. He often calls his son in the Air Force, who's stationed in Europe. The voice quality is "fantastic," he says, though he concedes he's kept his conventional phone line as a backup.

At work, Mr. Tworek has seen his own Frederick, Md., company, Qovia, grow in 2-1/2 years from a basement startup to one with 65 employees. Looking for a way into the Internet market after its "nuclear winter" a few years back, he began researching VoIP and decided that it was one of those rare new technologies where "the reality was far outstripping the hype."

To call using VoIP, a customer signs up with a carrier and is sent a VoIP gateway or adapter that connects a conventional phone to a broadband Internet connection. The phone call is carried as packets of data over the Internet.

The earliest VoIP companies were independents, such as Vonage, Packet8, and Voicepulse, which took advantage of the public Internet to connect users. Today, if a cable TV or telephone company provides the VoIP service, much of the connection will be on its proprietary network instead of the Internet, which probably will mean higher quality and reliability, says Lindsay Schroth, an analyst at the Yankee Group, a telecommunications research firm in Boston.

That's because these companies can make sure that VoIP calls get first priority for bandwidth, meaning that the movement of other data won't disrupt them. "If you're able to prioritize, you're going to have better quality," she says.

Unlike a conventional analog phone line, a VoIP phone is knocked out of service if a customer's home has a power outage, a significant drawback. But customers can buy a battery backup to keep their computer and VoIP working during a blackout. Some cable companies may even include the battery pack as part of their VoIP service, Ms. Schroth says.

Another challenge: As VoIP gains popularity, it is likely to come under attack from a unique form of spam: SPIT. That's Spam over Internet Telephones, says Pierce Reid, vice president for marketing at Qovia. Unlike telemarketers, who still have to make individual phone calls, telephone spammers could broadcast their recorded messages instantly to tens of thousands of phones via the Web. Qovia is working on a filter to screen out these unwanted calls.

Cable and phone companies charge a bit more than the independents, about $35 to $40 per month. That's still less than conventional unlimited phone plans.

While the main attraction now is the low price, eventually consumers will be attracted to enhanced VoIP features, Schroth says. For example, VoIP allows customers to pick their area code: If you're living in Seattle but have most of your family and friends in Boston, you could choose a Boston area code, allowing incoming calls to be free to the caller. You could also "port your service" - take your VoIP equipment along to a hotel room or a friend's home equipped with broadband and use it from there.

In the future, features like "find me, follow me" will allow customers to go to a website menu and customize their calls. Only calls from certain designated numbers made to your work phone, for example, would be directed to your home or vacation home. Eventually, VoIP could tie together devices in the home so that when the phone rings, the caller ID feature would display it on your TV or computer.

Despite such prospects, the next few years look rocky for VoIP firms. One big question: Will the government regulate and tax them as it does conventional phone companies or leave them relatively free, as it does with most Internet commerce?

No matter how that question shakes out, consumers will be the eventual winners, says Jeff Kagan, an independent telecommunications analyst. "The drawbacks [to VoIP] are there today, [but] they're going to be going away over the next year or two," he predicts. "Once we get rid of the problems, what we're left with is a [phone] service that costs a lot less."

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