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,,, and -- 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? 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, 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 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, 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.

Jill Hecht Maxwell is a reporter at Inc. Technology.

I'll Take Tuesday at Two

Star Trek's Captain Kirk frequently requested information by addressing the molecules around him: "Computer!" he'd bark. Of course, that was in the future, and this is now. We use telephones to talk to our computers. At least Kay Stewart's patients do. When patients call Stewart's chiropractic office for an appointment, they follow voice commands and propose a date and time they'd like to come in to see her. Software files the new appointment into Stewart's Web-based schedule and tells the patient if that slot has already been filled. Stewart's system even sends reminders to patients before the appointment. "I just had knee surgery, and I was out for three weeks," Stewart says. "People kept popping on and scheduling themselves. I didn't have to come to the office."

The technology Stewart uses, developed by an electronic scheduling provider called Xtime, in San Mateo, Calif., is an outgrowth of so-called voice portals, like Xtime's partner, BeVocal. Try this: Pick up the phone, dial 1-800-4-B-Vocal, and ask for "Business Finder." Then say Starbucks. A pleasant voice will give you the phone number of the nearest java joint, connect you directly, or provide driving directions. BeVocal lists more than a million ATMs, gas stations, hotels, and so on. The company sealed deals with Qwest Communications and Sprint so that for an additional few bucks a month on your cell-phone bill, you can tap into the service on the road.

BeVocal and competitor Tellme -- along with some smaller start-ups and some big-name Web portals like AOL, Yahoo, and Lycos -- are offering voice-generated services like stock quotes, sports scores, and horoscopes, plus information about traffic, airlines, and weather. Depending on the voice portal, you may have to register or submit to advertising, but the gist remains: you're essentially surfing a database with your voice. That's pretty handy for hard-traveling CEOs. "It's intuitive," says Aurica Yen, an analyst at the Yankee Group, in Boston. "The telephone is such a commonplace device, and the wireless phone is growing in consumer adoption. The next step will be how these voice portals expand their services beyond providing information."

Which brings us back to Stewart. "It's very difficult in this economy to find a front-office person for a small business," she says. Instead of fighting the help-wanted battle, Stewart volunteered to beta-test the Xtime scheduler. "The voice recognition and Internet schedule reduces tremendously the number of phone calls I have to handle myself," she says.

Xtime is also developing services for salons, restaurants, auto-service centers, and corporate-training vendors.

Filling your front-office void with a smart scheduler that doesn't take lunch hours or demand health benefits sounds great. But it comes at a price. Xtime spokesman Travis Murdock estimates that a service like Stewart's would cost approximately $36,000 a year -- about as much as a new employee.

Multiple-Personality Phones

A newer flavor of VOIP allows small and home offices to split a single high-speed digital line into unlimited phone numbers and voice-mail accounts eons faster and heaps cheaper than they could through a phone company. Because the lines are high speed, your client in Cairo won't sound as crackly as he would on many calls using Voice Over IP. But voice over broadband relies in part on digital subscriber line (DSL) technology, which is not without its troubles.

Companies like Pagoo, in Dublin, Calif., sell software to Internet service providers (ISPs), which in turn sell voice services to their DSL Internet subscribers. The cost: a monthly fee (in addition to a subscriber's existing DSL Internet fee) that's about 20% less than a typical household phone bill, says Pagoo CEO John "Joc" Jacquay. For that price you can both split your broadband connection into many lines and manage your phone systems on the Web. With a click of your mouse you can add a new line with a new number or forward your calls. Such features could be quite useful to soloists, people with home offices, or companies with a handful of desks. "People want to Web-enable their phone systems," Jacquay says, "but a PC with a dial-up connection was never intended to be a replacement for the telephone." At press time, Pagoo, which is already operating in Europe, was testing its broadband service in the United States.

Some consumers and small businesses have faced delays and confusion when trying to get DSL installed. Joe Laszlo, a senior broadband analyst at Jupiter Communications in New York City, calls DSL a good technology that has experienced "pretty significant growing pains as it transitions from experimental to prime-time, mass-audience consumer adoption." He adds, "A number of the ISPs that focus on small businesses have decided to pull away from DSL because it's hard to make that business pay off."

Jacquay is not concerned. "It is bumpy, but it will get there," he says of DSL, adding that his voice broadband technology also works using cable modems, fixed wireless systems, and other high-speed-access methods.

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