More Ways to Phone Home via the Internet

Prepaid phone cards that allow college students to make long-distance calls via the Internet will be among the blizzard of promotions that greet them when they return to campus this fall.

It’s no surprise that Internet telephony companies--whose products transmit phone calls via the Internet rather than over traditional phone networks--are targeting college kids. Students usually don’t have a lot of money and already are heavy users of telecom products such as prepaid calling cards.

“They tend to be early adopters, are technically savvy and price- sensitive and tend to be social,” said Scott Wharton, senior market manager for Israel-based Internet telephony provider VocalTec Communications. A pioneer in Internet telephony technology, VocalTec estimates that about 25% of its users are college students.

Internet calls can be made in several ways: from one PC to another; from a PC to a regular phone; and from a regular phone to another phone--like a traditional phone call--except via the Internet.

Internet telephony can be free (for PC-to-PC calls), or cost significantly less per minute than conventional calling for PC-to-phone and phone-to-phone calls. It’s important to note, however, that all types of Internet telephony can suffer from quality and reliability problems.

Because Internet telephony relies on a delivery system designed to transmit data and not voice, users often experience a slight delay between when the caller speaks and when the person at the other end hears the voice.

Companies are hoping that recent advances will entice college students--and their relatives--to experiment with their Internet telephony products.

“We’re talking about a system that in the last six months has improved significantly,” said Fara Hain, manager of marketing communications for telephony provider Delta Three. “It used to be very difficult and cumbersome to make a call from a PC and was almost a hobbyist thing. Today, you can call people and they don’t know you’re on a computer.”

It still takes some effort to make a call from a computer, particularly when calling from PC to PC. The service requires special software; a PC with a microphone, sound card and speakers; and an account with an Internet service provider. Callers speak into the PC microphone.

There are no charges for PC-to-PC service, although callers must pay for Internet access. Some companies also require a one-time charge for software. Other products, such as Microsoft’s NetMeeting and Netscape’s Conference, allow users to download their software for free.

Because there are currently no standards in the Internet telephony industry, users of most PC-to-PC products must have the same software and be online at the same time for a call to be connected.

This summer, San Pedro-based MediaRing introduced a service that rings a PC if it isn’t online--although the computer must be turned on to receive the call. Michael Dean, MediaRing’s vice president of sales, said users can try out the service, called MediaRing Talk, for 30 days after they enter their credit card information.

There is a $4.95-a-month charge to use the service, which requires both parties to have MediaRing software.

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PC-to-phone and phone-to-phone Internet telephony services provide savings on calls within the U.S., but offer the best value when used to contact friends and relatives overseas.

VocalTec offers PC-to-phone software for $49.95 after a two-week trial period. Those who buy the software can give a license number to a friend or family member, which allows that person to use the service for free. Because PC-to-phone service requires a connection between the Internet and the traditional telephone network, there also is a per-minute charge. Rates for international calls using PC-to-phone service are 50% to 80% less than traditional long-distance rates.

To use PC-to-phone service, a caller must activate the software while online. Some services require consumers to enter a user name and password and then the phone number they’re calling.

Most companies that offer PC-to-phone and phone-to-phone service require consumers to prepay for the service by providing a credit card number.

Some carriers have opted to bypass the crowded Internet system by building their own data networks. Users don’t need a computer to use these phone-to-phone Internet telephony services. Although it’s expected to become the most popular Internet telephony application, phone-to-phone is the most expensive form of the service.

International per-minute rates, however, still are at least 50% cheaper than traditional long-distance charges. Domestic rates are somewhat cheaper. Since most companies are still building their networks, service can be limited.

For example, Hackensack, N.J.-based IDT Corp. offers a 5-cent-a-minute rate from 62 cities in the U.S. About 60% of IDT’s customers are younger than 30, prompting the company to give away about 100,000 phone cards at campuses in several cities this fall, said Sarah Hofstetter, vice president of corporate communications for IDT.

Another Internet telephony option for the 30% or so of college students who don’t own a computer is a device from San Bruno, Calif.-based Aplio. The $199 gadget plugs into a user’s phone and requires callers to have an account with an Internet service provider.

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To use the service a caller makes the call and hangs up once connected. The Aplio device then will call back both parties after it’s transferred their call to the Internet. Both parties must have the device.

Sprint is testing a phone-to-phone service in Los Angeles, San Francisco, Seattle, Dallas and Atlanta. Sprint’s service lets users in these cities call anywhere in the U.S. for 7.5 cents a minute and to South Korea, Japan, Taiwan, India and Mexico City. (International rates vary.)

AT&T; also is conducting a phone-to-phone trial in San Francisco, Boston and Atlanta. Residents in these cities can call anywhere in the U.S. for 7.5 cents a minute from San Francisco, 8 cents a minute from Boston and 8.5 cents a minute from Atlanta.

MCI has not announced any plans for phone-to-phone Internet telephony service.

Because the market is so new, there are wildly different estimates of how profitable it will be in the future. A recent report from Prudential Securities predicts the market will grow from $21 million today to $1.16 billion in 2002.

Even this estimate would represent only 1% of long-distance telephony revenue in 2002, illustrating a resistance by users to adopt Internet telephony on a large scale until it becomes more like the traditional phone system.

“For the most part, phone service is still relatively reasonably priced,” said Eric Zimits, communications analyst at Hambrecht & Quist. “The complexity of Internet telephony and the call quality are still going to keep most people on the traditional public switch networks.”