America Online, which has been called "the Internet on training wheels," is once more entering a sphere formerly inhabited only by early adapters. AOL, which helped popularize the Internet, has now become the latest company to offer a service that enables Internet-based phone calls.
This month, in 40 markets across the country and in the Bay Area, AOL has started to offer current and new broadband subscribers the ability to make telephone calls over Internet lines.
The technology is known as VoIP, or Voice over Internet Protocol. This does not mean that customers will be making telephone calls from their computers but rather from a special adapter that hooks up to their telephone and a modem, an adapter that is reputedly easy to install.
AOL's Internet Phone Service is easy "to install, to customize, with super features and user-friendly," said Jim Tobin, AOL vice president of voice services.
In the United States, the number of VoIP subscribers is expected to grow from about 3 million today to 27 million by 2009, according to research firm IDC.
Why would you switch the method of transmitting your phone calls? Because it's cheaper assuming you've already got a broadband connection installed.
Tobin said that according to an AOL study, people pay an average of $51 a month for local and domestic long-distance calls nationally for their land-based lines. Internet-based calling plans typically cost less than $40 a month, with many less than $30 a month and some available for free.
AOL charges $22.90 for a dial-up connection and an additional $20 to $40 a month for a broadband connection. The latter is necessary to subscribe to AOL's VoIP service, which currently offers discounted monthly rates ranging from $13.99 for a local calling plan to $29.99 for a global plan. The rates rise by $5 a month after three months.
The local plan provides unlimited local and regional calls, and charges 4 cents a minute for domestic long-distance calls. The global plan offers "low" international rates and unlimited calls within the U.S. and Canada.
Kate Griffin, analyst with The Yankee Group, urged customers, especially dial-up customers switching to broadband, to ask themselves these questions:
- How good is your broadband connection? Cable companies and DSL providers disagree which of them provides the more comprehensive service.
- Does your provider offer 911 service? Not all do. AOL does.
- What is your backup for a power outage? Some adapters can be backed up with batteries but not all can.
- Even though VoIP providers say installing the adapter is simple, if you don't want to play with wires at all, this may not be the technology for you.
There are all stripes of providers of VoIP services cable and satellite providers, traditional telecommunications companies and the so-called pure-play providers that just deliver VoIP using some other company's backbone network.
The field is getting crowded. Look for prices to drop. Verizon, for instance, has added a new program for $19.95 a month with 500 outbound minutes, lower than its standard $29.95 a month for unlimited calls. Microsoft also entered the field last year.
Early next year, Comcast will launch its Digital Voice Service in the Bay Area. It has just rolled it out on the East Coast. Comcast distinguishes its service from VoIP because Digital Voice will run on its own privately managed network, not over the public Internet. And it will offer 911 capability.
Vonage is the current U.S. Internet telephony leader, with more than 600,000 customers. Other pure-play VoIP providers include 8x8 Inc.'s Packet8 and Primus Telecommunications Inc.'s Lingo. Costs vary from about $15 to $40 a month.
If you really want to save money and don't mind a bit of inconvenience, there are free VoIP services Skype and FreeWorld DialUp. For both of these you have to be on the computer with a headset with your correspondent also on the computer at the same time. But people who use the services are enthusiastic about them. They can be downloaded from their Web sites, www.Skype.com and www.FreeWorldDialup.com.
Steve Wilson doesn't care that you have to be on the computer at the same time as somebody else to use Skype.
"For most residential users, the majority of the minutes purchased from a telecom are spent on a small group of people that you call regularly. For example, getting just four high-usage people onto Skype has reduced the minutes I need to actually buy from a telecom by about 85 percent," Wilson said.
Oakland resident John Batcheller uses Skype on his Mac, which has a built-in speaker. Hecalls his brother-in-law in Amsterdam frequently and his friends in Asia as well.
"It's not a replacement for the phone, but it's a good alternative," he said.
A slightly different technology is FreeWorld Dialup, which operates through a network of networks.
Its chief executive, Joe Toga, said the service has had
Gartner analyst Elroy Jopling thinks the VoIP market will be dominated by the cable and telco companies.
"Economics are so much behind them because they have so much of the market and so much of the money that they can drop the price, although AOL has a community of interest behind them. Comcast can bundle services and can start dropping prices. It will be difficult for consumers to resist that," Jopling said.
On average, AOL's prices are not that different from its competitors, analyst Griffin said. But she said that AOL's biggest contribution is its role as a popularizer of the service.
"It is a recognized brand and will help to carry the (broadband) technology to the mass market," she said.
Francine Brevetti can be reached at (510) 208-6416 or firstname.lastname@example.org.