The Cutting Edge: COMPUTING / TECHNOLOGY / INNOVATION : Cheap Talk : With the right software, you can make long-distance telephone calls over the Internet

WASHINGTON —  A growing number of software companies are trying to take the Internet back to the future by offering a crude form of two-way voice communication on the popular worldwide computer network at a fraction of the cost of a regular long-distance telephone call.

The mushrooming popularity of the communications software--which requires a powerful computer with an Internet connection, microphone and sound card--poses a threat to long-distance carriers, which are already facing the prospect of new competition from cable operators and local phone companies as a result of telecommunications reform legislation signed into law last month.

More ominously, the software has federal regulators mulling the financial impact of yet another Information Age technology that allows consumers and businesses to bypass the phone network and avoid paying local phone-access charges. On Monday, for instance, a national trade association representing local telephone carriers, filed a petition requesting that the Federal Communications Commission “immediately stop” Internet phone software from facilitating free long-distance calls over the Internet.

In an 11-page petition, America’s Carriers Telecommunications Assn. asked the FCC to declare its authority over telecommunications services that use the Internet, telling the agency: “it is not in the public interest to permit long-distance service to be given away, depriving those who must maintain the telecommunications infrastructure of the revenue to do so.”

Those revenues, which total $20 billion a year, subsidize telephone service in high-cost areas.

Although only about 20,000 people are now regular users of Internet phone software, one Internet expert estimated that at least 500,000 copies of such software were distributed last year and that as many as 4 million copies could be in circulation by the end of 1997. One major phone user, Cornell University, said it is seriously considering diverting some of its voice-telephone traffic to its campuswide computer network, a move that could eventually pave the way for the school to shift all of its long-distance telephone calls to the Internet.

“This has the potential to grow into a multibillion-dollar business,” said Jeffrey Pulver, who compiled the software estimate and who publishes NetWatch, an Internet site that keeps abreast of trends on the global network. “This technology will revolutionize the way we use telephones.”

Pulver estimated that this software field has grown from a handful of competitors two years ago to more than a dozen now. They include VocalTec Inc., maker of Internet Phone; Camelot Corp., maker of DigiPhone; Internet Telephone Co., maker of WebPhone; Telescape Communications Inc., maker of TS Intercom; K&F; Software (also known as CyberScience, recently bought by Voxware Inc., developer of CyberPhone; and Quarterdeck Corp., maker of WebTalk.

At this early stage of development, Internet phone software is too primitive and the upfront hardware requirements too costly to jeopardize the long-distance franchises of AT&T;, MCI Communications Corp. and Sprint Corp. In addition to a computer, users must pay roughly $10 to $20 a month for access to the Internet, have a modem and a sound card, and purchase the Internet phone software itself, which ranges in price from about $50 for WebPhone to $150 for DigiPhone Deluxe.

But even with the most sophisticated equipment and software products, professional testers said, the Internet offers voice quality that is erratic at best, no match for wired telephones.

Byte magazine, which this month tested five Internet phone software products, said that at the most widely used modem speeds of up to 9,600 kilobytes per second, voices over the Internet sound “clipped.” A modem is a device that translates digital computer data into signals that can be sent over phone lines.

Quality improves with faster modems. But even at the fastest speeds, Byte tester Nathan Muller concluded that voice “quality is often determined by factors you may not be able to control, such as delay on the Internet, the other party’s equipment and settings.”

What’s more, users have to keep their connection to the Internet open if they are to be able to receive calls. Otherwise callers must first use a regular phone line to warn that an Internet call is coming.

Because of such inconveniences, many consumers report that interest in the Internet phone wanes after an initial burst of enthusiasm.

Cheryl Buzzell of Leominster, Mass., who recently graduated from Fitchburg State College, said that when she bought her Internet phone, she talked with strangers around the world. But now, she said, “I use the product to talk to my best friend in another state to try and cut down on long-distance calls.”

“It really does not sound like a real phone,” Buzzell complained, adding that if she and her friend “want to talk about something important, we usually take it to the real phone.”

Mitchell B. Hamm, a mechanical engineer in Cincinnati, said he set up his Internet phone “because of the gee-whiz aspect.” He said he initially used the phone to connect with all comers but soon grew tired of connecting with strangers.

“It kind of got old after a while,” Hamm said. “There are a lot of weirdos out there on the Internet.”

Nevertheless, scores of consumers have braved the obstacles and hanker for more.

Richard Moburg, a Chicago computer buff, said his only complaint was that the computers used by his Internet phone software to connect with other callers had become so busy that he had no chance to sign on to place a call.

“I thought it was quite good and really enjoyed it up until a couple of months ago,” Moburg said. “Now it’s become so popular you can’t even get on.”

Most Internet phone software works by first querying a huge database computer called a “server” that maintains a list of who is actively connected to the Internet. The two parties can then initiate a conversation. When the parties talk, software compresses their speech into tiny data packets that are sent over the computer network and then decompressed upon arrival so that the recipient can hear the message through the computer’s sound card.

The combination of compressing and decompressing speech produces a lot of distortion as well as an echo-chamber effect of delayed speech. Software developers said their products will become more popular as the technology improves.

“We won’t put the phone company out of business . . . but there’s a lot of good long-term potential in this technology,” said David Kutnick, vice president of business development at Santa Monica-based Quarterdeck, which sells WebTalk.

Danny Wettreich, chief executive of Camelot Corp. in Dallas, said he believes further technological advances in Internet phone software could make it highly appealing to businesses seeking to reduce their phone bills for calls to overseas offices.

“I think this could become an essential application for businesses who want to save money on their long-distance phone bill,” Wettreich said.

Such predictions have Mark Corbitt, director of technology at the FCC, worried. Of particular concern, Corbitt said, is how much voice and data traffic might be siphoned off the regular phone networks--where access fees can be collected--to the Internet.

Long-distance companies currently pay seven cents a minute in phone-access charges, for a total of about $20 billion a year. As bypass technologies such as satellite and computer networks proliferate, the telephone industry and federal regulators have come under increasing pressure to find new funds for subsidizing phone service.

“To make the books balance, they have to find a way to rob Pat to pay Peter to pay Paul,” explained Bill Freeza, president of Wireless Computing Associates, in a recent issue of CommunicationsWeek magazine. “The subsidy is deeply woven into the economics and political-contribution patterns of telephone companies large and small.”

Corbitt said his agency may take up the issue of phone subsidies as early as this spring. But he said he doesn’t consider the current situation as alarming as Freeza does.

“At this point, the technology is certainly in an early phase,” Corbitt said. “To the extent Internet technologies have the potential for offering alternative sources of communications, that will certainly make them [be included] as topics in our discussion of any rule-making” on revising telephone subsidies.