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Unlike the telephone, which requires a dedicated phone line for just one conversation, voice-over-Net technology chops sound into digital packets and slings them across the Internet in such a way that many calls can occur at the same time over the same line, easing pressure on networks and reducing costs.
Consumers have only just begun to respond. Research firm US Bancorp Piper Jaffray says Net-based calls accounted for less than 1 percent of worldwide calls in 1999, but it expects that number to jump to 30 percent by 2005.
Despite the rise of free voice services on the Web, some experts say it's unlikely Internet dialing will replace phones any time soon. Callers often encounter echoes and voice delays when talking over the Net. Plus long-distance rates continue to head downward.
"Unless you're making some really wild calls overseas, for the most part, I think you can get awesome deals on a regular phone plan and get better quality," says Jilani Zeribi, analyst with Current Analysis, based in Sterling, Va., which provides industry research to technology companies.
Mr. Zeribi says voice-over-Net services have made inroads into tightly controlled telecommunication markets such as Eastern Europe or South Korea, where limited competition often means higher long-distance rates. "In those cases, people are willing to put up with poor quality for significant savings," he says. "But to just save a few pennies, it isn't worth it."
For example, a call from New York to London using Sprint typically costs about 15 cents a minute, with a $5.95 monthly fee. Users who sign up for Sprint's 1,000 International Weekends plan can get 1,000 minutes per month of weekend international calling for $40, amounting to 4 cents a minute.
The site has some 9 million registered users. Dialpad's revenues, says company president Doug Ahn, are generated by online banner and audio advertisements, sponsorship buttons, e-mail campaigns to customers, and integrating Dialpad's service with other Web businesses.
Internet calling services are fairly easy to use, requiring just a sound-capable computer with a microphone and speakers. For better sound quality, you can buy a telephone headset - most of the Internet-phone services sell them. Once you have your equipment, go online, and register for a service. Free software often needs to be downloaded before typing in the number you want to call. But Go2Call, which offers free calling to the US, Canada, and Europe, only requires that you register before you begin.
A gateway server in London puts the conversation back together before sending it to its final destination. This method allows voice-over-Internet companies to sidestep the pricing plans of long-distance carriers and increase the amount of traffic a network can handle. (It also reduces the cost of each "call.")
While major telephone companies may experiment, they are hesitant to fully embrace Internet telephony for fear of undercutting their own long-distance revenues. "They're not about to cannibalize their cash cow," he says.
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