A New Kind Of Internet Chat

Telephone companies are charging into the Internet telephony

Sure, the Internet can provide your business with a worldwide audience, but what about the phone bills you’ll incur returning calls to Timbuktu? Fortunately, the Internet promises even bigger communication savings by drastically lowering your long-distance phone bill. Internet protocol (IP) telephony, one of the fastest-growing uses for the Internet, cuts long-distance phone charges down to a bare minimum by using existing data lines and gateways, which translate analog calls into digital information and back again.

Regular phone calls may travel through several circuit switches, while Internet calls need to travel through the gateway only twice: once to turn it to digital form and once to change it back. “Internet technology is more efficient,” says Lee McKnight, former principal investigator for the Internet Telephony Consortium at MIT. “You don’t need a dedicated line, like you do with a land line. You get savings using digital packets to talk to someone.” A large part of most conversations is, in fact, silence, so only the voice transmissions are sent over the lines using IP. These transmission are sent in the form of digital packets of ones and zeroes, which are then converted back into the sounds you hear.

Instead of paying between 10 and 30 cents per minute for domestic long-distance calls, most IP telephony services charge an average of 8 cents per call. Cost savings on international calls via the Internet can be even greater. “Because of the regulatory atmosphere, although it may only cost 5 cents per minute to actually make the call, it can end up costing a customer $2 each minute using traditional analog telephone service,” McKnight says.

A major drawback of using IP telephony is that it doesn’t give the stable quality that consumers expect during a phone call. If the lines are jammed with other Internet traffic, calls can break up and bits of the conversation will get delayed or lost. IP telephony calls can be made three ways: computer-to-computer, computer-to-phone or directly phone-to-phone.

According to McKnight, half a million people are using IP telephony, and the number is growing significantly each month. Analysts estimate that IP telephony software sales were $75 million in 1997, and Internet gateway sales will reach $500 million in 1998. Total global sales of long-distance IP telephony services added up to $123 million in 1997. In addition, analysts expect $157 million in calls will be made using IP technology in 1998, compared with $55 billion on the public switched telephone network in 1997 in North America alone. Killen & Associates, a market research and consulting company in Palo Alto, California, projects that by 2002 global revenue for IP telephony will reach $17 billion.

Eventually, competition between IP telephony services will drive the price of the long-distance phone call down to 5 cents per minute, says McKnight.

IP telephony started as a hobby for Internet surfers, who developed simple programs to allow them to talk to each other via Internet lines, but today several companies offer options for cutting costs by using IP telephony. For example, Netspeak,

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