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Last Updated: Friday, 11 March, 2005, 18:14 GMT
It's cheap to talk, on the net
Dan Simmons
By Dan Simmons
Reporter, BBC Click Online

British Telecom Tower
Traditional phone companies could be under threat from internet calls
Millions of people around the world have started using the internet to talk to each other very cheaply or for free. Dan Simmons investigates whether the phenomenon could ever replace fixed line and mobile calling.

They say there is no such thing as a free lunch, so how come millions of people are making long-distance telephone calls without paying?

A range of new talk services has sprung up on the web, many of them offering free calls.

Before now problems with delays and dropped connections meant net telephony was frustrating, but with broadband calls quality is much better.

Headsets are also better at cutting distortion and some connect direct to your computer.

Making a call on the net is cheap because all the networks between you and who you are talking to pass on for free all the packets of data making up your conversation.

By contrast phone calls on traditional phone networks incur charges every time they pass on to a network run by another operator.

'Making waves'

The most popular internet call company is Skype, which launched only 18 months ago.

So far 80 million people have downloaded its free software, although only around half of them use the service regularly.

It is simple and takes around five minutes to set up though calls are only free between Skype users.

Niklas Zennstrom, the boss of Skype who also masterminded the file-sharing network Kazaa, says he is ready to start making some waves.

A woman making a phone call using the VOIP
With some VOIP systems, you do not even need a PC to make a call
"You don't pay to send an e-mail or view a page in your web browser, and the same thing applies to telephony over the internet. It's completely free.

"One of the reasons why Skype is so successful, why we are actually the fastest growing product on the internet ever, is because it's so easy to use. You download the software and you start using it, just like you use a web browser."

Cheap talk

Voip saves you most money on international calls but is not entirely free, especially if you use it to call fixed and mobile phones.

The attractions of Voip are not just that it will save you money. There are some things it can do that other phone systems cannot.

For instance with Vonage's system, which works with a router and broadband link, you can take your fixed line number with you.

Kerry Ritz, from Vonage, says: "If you sign up to Vonage in the UK, and take your telephone adapter to France or to Spain, where approximately one million Brits have second homes, you can plug the Vonage service into a broadband connection and make and receive telephone calls as if you were in the UK.

"So in that case you're not making any long-distance calls back to the UK, and your family and friends in the UK aren't making long-distance calls to you in Spain or France. You're eliminating that cost from the equation."

Screengrab of Skype homepage, Skype
Net upstarts are undermining old-fashioned phone firms
Though obviously you have to have broadband connections in both countries.

You can also buy an area code which lets you make calls as if you were in that city or country.

Currently this is only available in the UK and North America and you have to pay a monthly subscription. So again it is cheap, rather than free.

Operator threat

This ability to free ourselves from national fixed line phone firms has led the pioneers of internet telephony to call it a "disruptive technology", one that undermines the need to charge for calls, certainly anything beyond that of a local call.

And while some national carriers have diversified away from voice, others could be toppled.

For instance, the Dutch national carrier, KPN, is planning to shed nearly half its workforce because it thinks Voip will cut its revenues in half.

The tune is changing in Poland too.

After years of living with high call costs under a virtual telecom monopoly more Poles have now used Skype than in any other country, bar America.

In Japan it is estimated three in 10 calls are now made using broadband.

And in Africa, the relaxation of regulations around internet telephony in Kenya, Nigeria and South Africa have cut business phone bills by up to 70%, although in South Africa it is the national carrier that is leading the way.


But do we really want to be tied to our PCs to make a cheap call?

Having got used to the convenience of mobile phones, are we really willing to carry our laptops to a wireless hotspot just to get in touch?

Old-fashioned phone, Eyewire
Are phone firms about to become antiques?
Some in the mobile phone industry do not think so.

Hamid Akhavan from T-Mobile does not believe that Voip will make a big difference to the mobile phone industry, because of the convenience of voice dialling.

"I would say that is not something we are focusing on. We don't see it as a revenue builder. We don't see it as a value-adder for our business and therefore we're not promoting it."

But mobile operators should not get complacent.

We might not all be rushing down to our local wi-fi café to make long-distance calls, but international charges make using a laptop much less expensive than using a mobile.

The handset manufacturers know it, too.

Motorola and Siemens are developing cell phones which can also make internet calls.

Again the calls are not free, and most wireless internet providers levy a charge, although there are 350 hotspots in the UK which do not bill internet callers.

On the move there is still a lot of fuss needed just to make a Voip call, and the quality is not always as good as a fixed or mobile line but there's no doubt that the net is certainly making talk cheaper.

As our voices are reduced to tiny data packets it is likely calls will be bundled in with our other data needs, possibly as part of a monthly bill and not necessarily provided by a telecoms company.

In future, we might not be charged by the minute, but it is unlikely to be a free lunch.

Click Online is broadcast on BBC News 24: Saturday at 0745, 2030, Sunday at 0430, 0645 and 1630, and on Monday at 0030. It is also shown on BBC Two: Saturday at 0745 and BBC One: Sunday at 0645. Also BBC World.

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27 Jul 04 |  Technology

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