You know something is beginning to hot up in telephony when service providers start dropping their prices. One internet phone company, engin, recently halved its national call rates to five cents a minute on its Voice Box products. Others are expected to follow.
Voice over internet protocol (VoIP) has come a long way since free services such as Skype were introduced in 2003. Then they catered only for users who spoke to their friends via their PCs with the help of an external microphone or headset and peer-to-peer software.
The calls were free but the process was fraught with the risks associated with peer-to-peer networks. Internet phone-to-phone deployments later became the domain of large corporations with their own private networks.
Now making internet calls is as simple as picking up your house phone. Voice quality can be nearly as good but you will need a reliable broadband connection, a VoIP adaptor and perhaps a router to turn your normal phone into an internet phone.
Although VoIP users are few compared with the millions of mobile and landline customers of traditional telcos, internet phone providers say their efforts are starting to pay dividends.
Engin claims 4000 paid subscribers in the nine months since launch, while MyFone says it sold 8000 units in four months. Engin's chief executive, Ilkka Tales, believes it will have 30,000 customers by June next year, the number required to break even. "Telstra still has the lion's share of [private] customers. But it is still new technology," Tales says.
MyFone product manager Anthony Wai says his company, which also owns MyFoneCard, is busy signing up 100 new customers a week. And with broadband penetration estimated to reach 50 per cent of all Australian households by 2009, according to forecaster IDC, it's certain more providers will appear.
Telstra and Optus have confirmed they will launch consumer VoIP products soon. Meanwhile, Optus has lowered its normal call rates to nine cents a minute to popular overseas destinations to counter competition from VoIP and phone-card providers (which incidentally use VoIP gateways to route cheap calls).
Industry analyst Paul Budde says the market is maturing. "Some companies are growing above the level of amateurs and hobbyists and will begin to make inroads. By the middle of next year, I expect Telstra will introduce a consumer version [of VoIP]," he says.
Tales says VoIP is attractive because it provides handset convenience combined with cheap, but good quality, calls - a fact some call recipients contest.
Before ditching your home line for a no-PC-needed VoIP service, consider the costs.
You will need special hardware to connect an analogue or digital phone to your broadband modem (this plug-and-play "box" converts voice signals into data packets for transmission). Engin and MyFone (MyNetPhone hardware by NetComm) sell them through electronics retailers from $149.
Next is the cost of a router (from $100) needed to allow the box to share the cable or ADSL connection.
Then start comparing plans - some companies charge a monthly fee and include free calls, others charge for calls only. Most providers, including Skype, offer a call-in facility as well. This means a new phone number in some cases, at least until number portability is extended to VoIP. But calls are cheap: using MyFone, 10 cents buys a local call, 60 cents buys a 30-minute call to Hong Kong and calls to mobiles cost 29 cents a minute without a connection fee.
Next consider your broadband allowance. A 10-minute VoIP call chews 1MB of data transmission (500KB each way), so check if your ISP counts uploads as well as downloads and how much extra this could cost.
At www.ozinternetphones.com there's a list of Australian VoIP providers, useful cost comparisons, user-friendly answers to common questions and pointers to good deals. Check with each company on latest call rates as these can change quickly. As a heavy user, this writer clocked up 2000 minutes, or 200MB, in a month on MyFone, exceeding a BigPond business plan allowance during testing.
Last, consider keeping a parallel phone line in case of broadband failure, although engin's new generation box will automatically switch from VoIP to ADSL when needed.