Buh-Bye, Bell?
Beema, Inc., a multimedia production house, found that it could save money by using Internet telephony rather than the traditional telecoms. But will it work for you?
Inc.ubator
Internet telephony takes on the traditional telecoms. But will it work for you?
Beema Inc. has just eight employees, but those staffers are spread out among four offices: three in California and one in Cincinnati, where IT guy David Lemmink resides. Company president and CEO Steven C. Toy, who works in the multimedia production house's Campbell, Calif., headquarters, says that the company's phone bills would be $2,000 to $3,000 a month, were it not for Lemmink's technical wizardry. Lemmink took the high-speed lines the offices were already using for Internet access and pressed them into double duty as phone lines. As a result "we pay no charges to any telephone company for calls between our offices," Toy says. That's right: Beema's interoffice phone bill is a big fat zero.
Sounds like a good deal, right? But setting up this mini Internet telephone network cost Beema $10,000 in modifications. Even if such a system were to pay off in the long run, not every small shop could afford that kind of hit up front -- and not every small shop has a David Lemmink.
Several Web-based services now offer an alternative to buying and installing your own telephony equipment and software. These sites -- which include Net2Phone.com, iConnectHere.com, Dialpad.com, and PhoneFree.com -- offer free or inexpensive local and long-distance service and very competitive international rates (including great deals on international calls if they're PC to PC as opposed to using a computer to call someone's regular phone). Since domestic long-distance telephone rates have dropped to a few cents a minute, international calling is the killer app for these sites. Doing business in China? IConnectHere.com will put your call through for 25¢ a minute, compared with the $2 that regular phone companies charge, says Noam Bardin, CEO and president of Deltathree, the company that runs iConnectHere.com, based in New York City. Some downsides: calls aren't always of "pin drop" quality, and such business services as internal call routing simply aren't available.
Now for a quick primer on Internet telephony, also called Voice Over Internet Protocol, or VOIP. On the good old-fashioned phone network, calls whiz through local and long-distance wires, racking up taxes and tolls along the way. With VOIP, calls that start at your office jump onto the Internet and then reconnect with the phone system at the very last stop -- the office of the person you are calling. It's kind of like what happens when you use the Web itself: when you visit www.louvre.fr to view the Mona Lisa, you're not paying for a long-distance call to France, just the local call to your Internet service provider.
You may not know it, but you've probably already used a version of VOIP. Many office phone systems send calls through digital switches before kicking them out to the traditional phone network, and some long-distance carriers route calls through chunks of the Internet to save themselves money.
Thrifty souls have been transmitting voice calls over Internet data lines for at least two or three years now. The first VOIP calls were computer to computer, with the callers speaking into microphones on their PCs. Later, callers using computers to connect could speak to one another on the telephone. But calls were plagued by "latency" (that weird delay when you can hear your own voice after you've already already finished finished talking talking), "jitter" (when your voice sounds as if it's qui-ver-ing), and connection problems. "Sometimes calls traveling across the public Internet just got lost," says Aurica Yen, an analyst at the Yankee Group, in Boston.
Today industry competitors have improved call quality considerably. The latest advances are "Internet phones," appliances that plug into a phone jack. Such devices, like the $199 Aplio/Phone (from Aplio, in San Mateo, Calif.), eliminate the need for a computer altogether for folks who might balk at talking to their beige desktops all day. (Internet phones are hardly perfect yet: both the Aplio caller and the call's recipient must have an Aplio/ Phone, for instance, in order for the call to go through.)
Adding to their marquee offering of cheap calls, Internet telephony providers are courting small businesses with services like unified messaging and live-calling software for consumer Web sites. ISPs partnering with Deltathree offer voice-mail services for 80% less than what traditional voice-mail service costs, says Deltathree's Bardin. "And that includes faxes and the ability to access it all online," he adds.
Sheri Harris, a business strategist at Ignition State, a Chicago-based Internet-consulting firm, became interested in VOIP last summer. The draw: those cheap international calls. Many of Ignition State's 40 employees visit clients in Europe and make costly calls back to the home office. Harris tried several services before settling on Go2Call.com, in nearby Evanston, Ill. She likes Go2Call's voice quality and general ease of use. (Unlike most services, Go2Call can be used from any computer without downloading software.) Now Ignition State consultants traveling to Europe pack headsets that they plug into PCs at their clients' offices. As a result of using the new service, the company has cut its international phone bill in half. "We can do business better and more efficiently when we don't have to worry about passing those expenses on to the clients," says Harris.
Despite the lure of cheap calls and new business-focused services, small companies are hardly flocking to VOIP Web sites. Instead, CEOs who can afford robust custom network installations like Beema's seem to prefer them. One reason: the sites can't handle inbound toll-free calls. Nor can they route calls around an office. "Most of these providers really are not business-class yet," says Lisa Pierce at Giga Information Group in Cambridge, Mass.
Recently, traditional phone companies have complained about the way VOIP providers have managed to avoid paying -- and charging customers for -- taxes and tolls. "It's a regulatory loophole that's been waiting to be closed for a long time," says Pierce. One thing, however, is clear: VOIP isn't going away. Last August, AT&T pumped $1.4 billion into Net2Phone (that's billion, with a b), which is a sure sign that traditional telcos won't be sitting back while upstarts take over their turf.
