Net gains as phoning evolves

Many businesses already use IP phones, but now this cutting-edge technology is ready to enter the home.

If you're a fan of "West Wing," you might have seen some curious- looking phones on the desks of Martin Sheen and company. Those phones, which use technology called VoIP, or Voice-over Internet Protocol, could soon look a lot less alien.

In addition to the offices on the hit TV series, some real-life businesses are already wired with these phones, which use the Internet's infrastructure instead of standard land lines, allowing one to field calls via computer. They also offer a slew of cool new features.

Introduced about eight years ago, VoIP phones, also called IP phones, have been slow to take off. Interest was piqued when they first came onto the scene, but much-publicized kinks, such as poor sound quality, kept many potential users away.

But that's now history. With voice quality and other features sharper and more sophisticated, Internet phone products and services are finally ready for prime time.

Just last week, telecommunications giants AT&T and Time Warner Cable announced aggressive plans to make Internet-based phone service - which serves as a combination of a computer, regular telephone, and cellphone - available to millions of business customers and consumers in 2004.

Some might find the offer hard to refuse. Although customers' phone or cable bills will vary according to the services they use and the equipment they need, users won't be charged extra for long-distance calls that are routed over the Internet. The ability to bypass the traditional telephone network means that long-distance calls can be connected as inexpensively as local ones.

Kimmarie Messer, a marketing executive who travels often, is among those who are most enthusiastic about the long-distance perk.

Ms. Messer, an early adopter of new technology, was selected by Minnesota-based Qwest communications to be among the first consumers to test its Internet phone service. "I take my phone with me on business trips," she says. "It fits in my suitcase like a small box, and I can plug it in at the hotel and call my husband and kids for free."

The cost savings is clearly the biggest draw. But IP users also talk about expanded features, which allow them to manage their calls in new ways.

Internet phone service typically allows customers a wide range of options. These include the ability to view on a computer screen a list of the names and numbers of incoming or missed calls, to make a call by simply clicking on a name, to don a headset and field incoming calls via computer, to access the Web by telephone, to set up a list of callers who should be forwarded directly to voice mail or to a cellphone, and to allow users to connect to the system from anywhere and still use the same phone number.

But this technology - although improved - still isn't perfect. During a power failure, for instance, an Internet phone won't work. And when an Internet connection is lost, so is the IP connection.

None of this fazes Tony DiBenedetto, a regional manger for Cisco Systems, a leader in IP technology. Cisco now has 10,000 corporate clients using 2.3 million of its Internet phones. Mr. DiBenedetto is convinced Internet-based phone service will become mainstream. "The only question," he says, "is how long that will take."

According to In-Stat/MDR, a technology research firm in Scottsdale, Ariz., the market will grow from $54.9 million in 2002 to $141.1 million in 2007. The company also predicts that although sales of IP phones will not outpace those of their traditional counterparts for many years, they will increase by about 20.8 percent each year.

Those who might not be ready to throw away their standard home phones - or to spend an average of about $200 to upgrade to the needed equipment - have the option of utilizing the Internet phone service by simply attaching a modem and an adapter to those trusty phones they already own.

While consumers will have to sort out the various equipment and offers, some government officials are debating another issue: whether to impose regulations on Internet phone service. Earlier this month, the Federal Communications Commission indicated that regulations would be few, if any, which makes the business of providing IP products or services more financially attractive.

This is one reason the market is heating up.

"Regulators are tacitly saying they would prefer a hands-off approach," says Boyd Peterson with the Yankee Group, a technology research firm in Boston. "Which means that it won't be a burden to be an IP provider."

Not only are phone companies scrambling to offer Internet phone calls, but cable companies are nipping at their heels.

Time Warner Cable, for example, is offering service for its digital phone, as the company has branded it, for a flat monthly rate of $39.95. This includes caller ID, call waiting, and most alluring of all, unlimited local, in-state, and long-distance calls.

Sales have already been brisk. "We are signing up 250 to 300 new customers a week," says Time Warner spokesman Keith Cocozza.

Comcast also plans to roll out a nationwide Internet phone package - or "bundle," as industry insiders call it - by 2005. It will probably include a price break if customers buy video and high-speed Internet access.

"What both phone and cable companies are gearing up for," says Kate Griffin, a colleague of Mr. Peterson's, "is the battle of the bundles."

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