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Ready for Internet phone service? 5 things to know

Does your business make a lot of long-distance calls? If so, you might want to consider Internet telephone service.

This revolutionary breakthrough can cut your long-distance costs sharply. The Web has promised phone service for a long time. But Internet phone service is finally becoming a viable business option. This service is properly called Voice over Internet Protocol, or VoIP.

VoIP uses traditional telephone equipment connected to an adapter. The adapter connects to a modem and routes your calls over the Internet.

However, VoIP is something of a mixed bag. So before you hop on the bandwagon, here are some things to consider.

1. First and foremost, VoIP can save you money.

If you have standard long-distance, you might pay 10 cents per minute. For frequent users, this can easily run hundreds of dollars per month. Plus, you have to pay for local service.

Contrast that with rates from Vonage (www.vonage.com), a leading VoIP provider. For about $49.99 per line monthly, you get unlimited business calling. This includes local service and long-distance service within the United States and Canada. If you can get by with 1,500 minutes, the charge drops to $39.99.

Further, services like a dedicated fax line, voice mail, call forwarding, and caller ID are free. And calls to other Vonage numbers (even international ones) also are free.

There are numerous other providers that offer service at similar rates. You should have no trouble finding a provider that meets your requirements.

2. VoIP is catching on fast and becoming hotly competitive.

Until recently, VoIP was only offered by small startups. But now more established companies are seeking a piece of the action. These companies see the huge potential for VoIP and want in before it's too late.

AT&T (www.att.com) entered the VoIP market in 2004 with its CallVantage plan. Business service is $49.99 monthly for unlimited local and long distance calls. AT&T has been finalizing a merger with SBC for early 2006. So these details are likely to change.

Qwest (www.qwest.com), a regional Bell operating company, also launched its OneFlex plan in 2004. By early 2005, it was available in more than 200 cities. Qwest has been continuing to expand it.

Qwest offers four types of service, customizable for any size business. It declined to provide pricing. However, Qwest spokesperson Claire Maledon said businesses should save 20% to 30% over traditional service.

Even cable companies want a share of the action. In 2004, Time Warner launched VoIP service in selected areas and is increasing its coverage area. Comcast also is planning to offer VoIP.

3. VoIP providers are targeting small businesses.

Many VoIP providers are working hard to attract small businesses. Cost savings alone are enough to pique business interest. However, other features might cinch the deal.

Many VoIP providers are planning to make extensions available. These function like extensions on a regular telephone system. If you have a dozen phones, you probably have one main number and 12 extensions. AT&T and Vonage are running pilot programs with this feature.

Packet8 (www.packet8.net), a California VoIP provider, already offers extensions. For $39.95 a month, you get unlimited local and long-distance calls. Each extension is also $39.95 per month.

Most VoIP providers allow you to select an area code. This is great if you want to maintain a presence in many cities. You can set up multiple lines, each with a different area code. Clients can reach you without paying long distance charges. Alternately, you can get a toll-free number for an additional monthly charge.

Changing telephone numbers can wreak havoc on businesses. Fortunately, many VoIP providers allow you to transfer your current number. But it can take weeks, creating an awkward transition.

4. But you'll have to fiddle with technology.

Given the fact that the Internet and computers are involved, VoIP isn't too complicated. But it isn't as easy as plugging a wire into the wall.

Your phone plugs into an adapter provided by your VoIP company. The adapter then plugs into your broadband modem. A broadband connection is recommended by all VoIP providers.

Unfortunately, with that setup you can't surf the Internet while you use the phone. Only one can be plugged into the modem at a time.

The solution is a router, a small computer that connects networks to networks. In this case, your phone and computer constitute a network. The network you're connecting to is the Internet. You can find a router for about $50 at an electronics store.

The phone adapter, computer and modem connect to the router. The Internet-access stream enters the system through the modem. It flows to the router, which separates it for the phone and computer. Even with multiple computers hooked up, there is no discernable slowdown in service.

You'll have to configure the router to work with the computers, phone adapter and modem. Most people should be able to do that. Or your VoIP provider or Internet service provider might help.

5. Nope, VoIP isn't perfect.

Few things work as well as traditional telephone service. The industry's goal is 99.999% reliability. Internet service is rarely that reliable.

Power outages can be a problem. Traditional telephone service is not affected by power outages. But VoIP relies on a modem plugged into the electrical grid. No juice, no phone.

To solve this problem, you can purchase battery backups for your VoIP equipment. When the power goes out, they'll provide temporary power. Some will provide power for hours. But this might not be good enough.

There are workarounds. Many VoIP providers offer roll-to features. Much like call forwarding, the roll-to feature sends calls to another number. You specify the roll-to number when you implement your VoIP system. It works automatically whenever a caller can't get through on the main number.

You should consider maintaining one traditional telephone line. That way, you can roll calls to that line. Power outages won't disrupt your ability to receive calls.

Another consideration is the ability to call 911. Many providers already offer 911 service — and in May 2005, the Federal Communications Commission ordered all VoIP providers to begin offering Enhanced 911 service within 120 days. Enhanced 911 (E911) ensures that 911 calls are routed to the closest Public Safety Access Point (PSAP). E911 identifies your location. The PSAP can dispatch emergency help even if you can't talk. Some providers may still not be in compliance; check with any you consider to make sure they are.

Historically, Internet phone service has been plagued by delays and choppy sound. That's because it's digital. Sound is transmitted as 1's and 0's. When it enters the Internet, it's broken into small pieces called packets.

The packets are routed through various lines until they reach their destination. There, they are reassembled. Packets can arrive late, or not at all. Therefore, the sound can be delayed or choppy.

VoIP companies say they've overcome these problems. But they don't claim 99.999% reliability. People familiar with the service say it's better than cellular, but not as good as plain old telephone service (POTS).

POTS is more than 100 years old. Its issues were resolved years ago. The Internet is still evolving. VoIP works, but you'll encounter intermittent problems.

Nonetheless, VoIP has come a long way. Like other technologies, it likely will get better and cheaper with time.

VoIP rates make a compelling case for business use. If you want to tiptoe in, try a company with a money-back guarantee. And make sure you understand the terms before taking the plunge.