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By DAVE GUSSOW, Times Technology Editor
© St. Petersburg Times, published April 24, 2000
The conversations started with an exchange of shouted words, not out of anger but necessity, thanks to the newest way to make a phone call.
My friends' end of the conversations was on a telephone; mine was spoken into a headset plugged into my home computer. The connection was made over the Internet, and it certainly wasn't crystal clear: "Hello?" "Can you hear me?" "Hello?" "Can you hear me?"
"It's kind of like a bad cell phone," neighbor Scott said. "You keep breaking up. It's not a good connection."
The long-distance chat brought similar comments: "I hear an echo," friend Ed said. "It's almost as good as a phone, but not quite. It's garbled."
While the quality left a lot to be desired, the price did not. The calls were free through one of the growing number of Web-based phone services that are attracting millions of computer users with bargain rates.
It doesn't take much for a consumer to get started. Many services offer free software or access through their Web sites, which usually require information for registration ranging from a name and e-mail address to a lot of personal data. To get started, a user needs only a microphone or headset, a computer with a sound card and an Internet connection.
The link to the Web can be made through a dial-up connection and an Internet service provider such as AOL, although the quality improves with a high-speed connection such as a cable modem or DSL service.
Internet phone calling is becoming such a phenomenon that even Ma Bell wants in on it. AT&T, Liberty Media and British Telecom recently invested $1.4-billion in a company called Net2Phone, which charges a penny a minute for calls within the United States. Yahoo bought a 5 percent stake, and deals with America Online and Microsoft also are expected, the company says.
Those investments give the Internet telephony industry credibility, said Sarah Hofstetter, Net2Phone's vice president of corporate marketing. The company claims 2-million members who spend about 1-million minutes a day on calls. It's more than techies playing with computers or kids trying something out, she said. "It's a serious tool."
Net2Phone of Hackensack, N.J., has been in business since 1996, a time when high-speed Internet connections were scarce. "Now that bandwidth is there and connections are faster, the quality of the calls is so much better," Hofstetter said.
Better, but not perfect. The Internet is a series of different computer networks, not a unified system like a phone network. The voice in a typical callis digitized and transmitted as a series of information packets, which can take different routes to the destination where they are reassembled. If Internet congestion delays a packet, the call can sound broken up, garbled or delayed. In addition, problems with the Internet service provider, the computer's sound card or the headset can affect the call.
And for those confused by rate wars waged by long-distance and cellular companies, don't expect the Web-based services to offer any relief. There's free Dialpad.com, cheap (a penny a minute at Net2Phone, flat monthly rates Accesspower.com. Some have free software, some charge. Many sell cards that work like typical prepaid phone cards.
Dialpad's free service touched a nerve that may make free calls the standard fare.
"It's certainly a possibility," said David Greenblatt, Net2Phone's chief operating officer. "The fact is, these prices are heading to the point of no-cost communications domestically. The promotions indicate that (free service) is where the industry is heading, and we are a leader in the industry."
The falling rates and rise of Internet telephone services won't spell the end of traditional carriers, said Amanda McCarthy, an analyst at Forrester Research in Cambridge, Mass. The new sites appeal to people such as college students and those who make a lot of international calls because they are willing to put up with the lower voice quality for the price.
"But beyond that, those consumers aren't turning off existing long-distance services to use these free services," McCarthy said. "They're just able to call a heck of a lot more."
Voice communication is being offered to participants in some online chat rooms and is coming soon to the popular "instant messaging" service offered on AOL. That will allow teenagers who are the most avid users of such "live chat" to talk and type simultaneously -- without tying up a second phone line.
What the Internet telephony companies are banking on is the ability to sell advertising based on the number of people visiting their sites and how long those users stay on the site during the calls, called "stickiness" in Net jargon. Dialpad, for example, says users spend more than 17 minutes during an average visit.
On Dialpad.com, the ads are placed in a strip at the top of the window that includes the phone "dial." A person who receives a Dialpad call on the phone gets only the call, no audio ads.
Analyst McCarthy, though, doesn't think that business plan will necessarily be successful. The sites attract their audience with free services, which may not appeal to advertisers looking for customers inclined to buy something, she said.
There also are questions of privacy. Dialpad.com's approach underscores that the price for "free" on the Internet often is giving up a considerable slice of your privacy.
To get started at Dialpad.com, a user must fill out a registration form. It asks the user to set up an ID and password. It also asks for name, address, phone number and e-mail address. The user can't continue unless all required fields are completed. In addition, it asks whether the user wants the ID available to other members of the service in an online phone book and whether the user wants to receive promotional e-mails.
Then it really gets personal: date of birth, gender, marital status, number of children (and ages), household income, home ownership, education, employment and interests. Again, if all required fields are not completed the user can't continue.
Finally, it takes just a click for a quick download and a telephone dial pad pops up on the screen. Put on the headset, click the number and talk.
By contrast, at Net2Phone, a user gives the type of computer and an e-mail address, then downloads the free software. Registration requires name, address, phone numbers and e-mail address.
"They will find advertising and promotional offers that are relevant to their needs," Hewitt said. "We don't intend to waste their time while on the phone."
Since it started operations in October, privately held Dialpad.com claims it signed up more than 5-million members. According to company statistics, members have made more than 60-million calls since its inception (22-million in March alone), and the average call lasts a little more than five minutes.
In addition to advertising, the Internet phone services hope to sell licenses to other sites. One service, Click2Talk, lets Web surfers talk to service or sales representatives from the site they are visiting, or request a call back while online.
The telephony services may follow the pattern of other Internet crazes. Because it doesn't cost much to set up an Internet telephony service, McCarthy, the analyst at Forrester Research, expects the number of sites to increase in the short term. Later, as a shakeout occurs, some may join bigger sites, such as Yahoo, as part of the bundle of services such portals offer, including free e-mail, personal calendars and shopping.
For now, though, consumers and businesses face a dizzying array of choices. Whatever the option, users will have to balance the quality versus the cost.
"Great connections are worth the money," analyst McCarthy said. "Every last drop of it."
-- Information from Times wires was used in this report.
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