July 29, 2007 in Business

Mixed signals

By The Spokesman-Review
 
Jesse Tinsley photo

Adam Johnson, left, is CEO and Shawn Butterfield is vice president for information technology at Convertec Business Solutions, a small VoIP service provider based in Coeur d’Alene. It provides Voice over Internet Protocol telephone service to residences, small- and medium-sized businesses.
(Full-size photo)

Two weeks ago, Pat Rooney’s phone company shut down without telling him.

The Spokane resident had paid $199 last fall for a yearlong subscription to SunRocket, an Internet-based phone service allowing him to make unlimited long-distance calls in the United States and Canada and receive extra features, such as caller ID and three-way calling. But Rooney, 54, had to search online to discover the three-year-old broadband telephone company had ceased operating.

Rival companies offered Rooney and other former SunRocket clients special deals, but he was leery.

“Once you’re burned, you want to go with a company you think is going to be around at least a year,” he said.

Rooney has since switched to Vonage, a competing Voice over Internet Protocol (VoIP) provider, after doing some research. But his problems didn’t end there. The temporary number Vonage provided was already assigned to someone else, Rooney said. And while he was able to make calls, he was still waiting for his permanent number to be transferred.

Internet-based telephone service has lured millions of customers like Rooney looking to save on their monthly phone bills or get more features for their money. Cable providers and traditional phone companies now offer VoIP services, and numerous small firms, including a startup in North Idaho, are competing with well-known names.

The resulting array of competing plans and providers, however, may boggle consumers and small business owners interested in trying VoIP. Would-be customers also may be discouraged by the industry’s high-profile legal battles, accounts of call-quality and customer-service problems or lack of industry regulation. While VoIP advocates say broadband telephone service has come of age, switching may involve tradeoffs for consumers.

The basics

Traditional phone service using the public switched telephone network generally is reliable, works during power outages and allows 911 dispatchers to see callers’ addresses during emergencies. But phone service in Washington from Qwest and Verizon ranges from $12.50 a month for local calls to $66.99 for unlimited long-distance in the U.S., Canada and Puerto Rico with five features. In Idaho, local service with those providers starts at about $17, and long-distance also can be $70 or more.

VoIP enables people with high-speed Internet connections, such as cable, DSL or wireless broadband, to circumvent incumbent phone companies and make calls through those connections by transforming voice signals into data packets that travel over a network, such as the Internet.

Broadband telephone is rapidly changing the telecommunications industry worldwide, said Wilford Saunders, assistant director for telecommunications for the Washington Utilities and Transportation Commission.

“The technology has really come a long way in the last few years, and the voice quality is as good or better than cell phones and just about the same par with what you’re used to traditionally,” said Joan Citelli, spokeswoman for Santa Clara, Calif.-based 8x8 Inc., which provides residential and business VoIP services under the name Packet8. “The problems that have surfaced are really the result of companies not being managed properly … I think the technology is ready for prime time.”

VoIP comes in several varieties. People can make free calls from one computer to another using “soft phones” — computer applications that emulate phone functions — through services such as eBay Inc.-owned Skype, Gizmo and Yahoo! Messenger.

But making VoIP calls to and from traditional phone numbers typically requires a paid subscription to a provider that has access to switches connecting Internet-based calls to the traditional network. Subscribers may use traditional phones by hooking them to devices called analog telephone adapters — provided as part of a package by some VoIP providers — that connect to a home network router or broadband modem. They also may use special IP phones that tie directly into a network. Other phones allow users to go mobile by tapping into Wi-Fi hot spots.

Estimates of the total number of residential VoIP users vary, but providers continue to report increases. Market research firm JupiterResearch predicts the VoIP market will reach more than 25 million U.S. homes by 2012, spurred by increasing broadband subscribers and expansion by cable companies that bundle voice with other services.

Home VoIP

Despite his troubles with SunRocket, Rooney said he would still recommend VoIP service. He figures that eight months of service for about $25 a month was still cheaper than buying from an incumbent phone company.

Many VoIP providers offer unlimited long-distance calling in North America, cheap per-minute international calling rates and a host of features. VoIP also allows users to take their phone numbers with them when moving or traveling, hooking up their equipment to any broadband connection, although some companies’ service contracts prohibit that.

Service from some providers is not available in all areas. Many providers can “port,” or transfer subscribers’ original numbers, but that process can take days.

Cheap long-distance appealed to Chris Terriff of Greenacres, who has used Vonage for more than a year, he said. A Canadian citizen, he uses VoIP to call relatives there.

Vonage, the leading VoIP-only provider, offers unlimited calling to the U.S., Canada and Puerto Rico for $24.99 a month. Users also receive popular features such as voicemail, call waiting and three-way calling. But the publicly held company, which boasts about 2.4 million subscriber lines, encountered legal trouble last year when Verizon sued alleging patent infringement.

Packet8 offers a similar package for the same price.

Qwest’s “OneFlex” VoIP service in Washington costs $29.99 per month for 14 features, but long distance costs extra per minute up to $19.99 per month. Verizon’s “VoiceWing” VoIP service costs $24.95 a month for unlimited domestic calling.

Qwest, like other traditional telecom providers, has lost customers to wireless and VoIP, and is responding with its VoIP services and packaged bundles, said spokesman Bob Gravely.

For an extra charge, many VoIP subscribers can add incoming phone lines in other area codes that forward to their main lines, allowing family and friends to contact them through local calls. Terry Moore-Read of Spokane, an information systems analyst for a local law firm, has a British phone number that rings his home phone for about $4 monthly, he said.

“For just the simple extra phone line, it’s a great service,” Moore-Read said of providers like Vonage.

Even people in remote areas can tap into VoIP through wireless broadband services, such as those offered by Air-Pipe LLC of Spokane. Some rural subscribers didn’t even have regular telephone service before VoIP, said owner Bill Geibel.

Trouble at home

But VoIP users also report drawbacks.

“It’s definitely not as reliable as the regular phone was,” said Spokane resident Loren Baker, 31, who uses both Skype and Comcast VoIP services. Baker said Skype’s free video conferencing feature allows him to keep in touch with a friend on a mission trip to Oaxaca, Mexico, and with parents in Montana.

For users who want to call traditional numbers using Skype, the four-year-old company sells unlimited nationwide calls for $29.95 a month, international calls starting at 2.1 cents per minute and three months of incoming calls to a local phone number for $18. It claims roughly 220 million registered users.

Interruptions in broadband service can disrupt Internet-based calls.

“There’s no guarantees if you’re using the Internet to place calls,” Moore-Read said. “Most people experience good quality most of the time, but it’s like anything, there can be hiccups with it, and you might notice the odd click and gap in a conversation.”

VoIP remains largely unregulated, in contrast with traditional phones. Washington state utilities regulators don’t officially deal with VoIP customer complaints. But the federal government does require some VoIP providers to supply 911 service, and to comply with federal wiretapping rules. The Federal Communications Commission now mandates that VoIP providers record subscribers’ street addresses so that 911 calls can be routed to proper operating centers. If someone moves or makes a call from a different location, however, their call might not get through.

VoIP depends on wall power and won’t work during outages. But subscribers can purchase adapters or power strips with backup power supplies.

And there can be a technological hurdle.

“I would never recommend it to somebody who just e-mails or a retired person who wants to save some money,” said Terriff, the Greenacres man.

New players

A startup VoIP provider in Coeur d’Alene hopes to capitalize on a perceived lack of customer service among telecom providers. Three-year-old Convertec Business Solutions LLC boasts only about 100 VoIP customers.

“It’s about education, and that’s what we’re trying to market everything towards: That there is a choice, and that you can like the phone company,” said CEO Adam Johnson said. Convertec’s residential plans cost $23.99 for unlimited nationwide calling.

Convertec also provides numbers with North Idaho area codes, which aren’t available through Vonage, Johnson said. Operating out of a small office, Convertec contracts with other companies to connect calls with the public telephone network, and it uses another vendor to get phone numbers.

Comcast promotes customer service as part of a pitch for its Digital Voice service, started in 2005, which the company offers for $33 for a year.

Time Warner Cable in North Idaho offers VoIP for $49.95 a month.

Comcast also is part of an increasing trend to offer VoIP service over proprietary networks, allowing providers to improve call quality by prioritizing calls over other types of traffic. Seattle-based Internet service provider Speakeasy Inc. also uses a proprietary network, according to the company.

Business VoIP

VoIP providers increasingly are trying to dial in small businesses.

VoIP can help small companies have a big-corporation feel, Johnson said. Its small-business service starts at $49.99 a month per line and includes features like voicemail forwarded to e-mail as an audio file. For several thousand dollars, Convertec outfits a client with several headsets and a PC loaded with open-source-based software offering features such as call logging, custom hold music and advanced call forwarding.

Packet8 business VoIP lines cost $49.99 per month, plus activation and equipment fees, and Vonage’s unlimited plan costs the same.

VoIP may be advantageous for businesses because they can acquire phone numbers nationally or internationally, so customers can call locally, said Moore-Read, the information systems analyst.

Spokane law firm Lukins and Annis uses VoIP running on its data network through a server to coordinate between offices in Moses Lake and Coeur d’Alene, said Moore-Read, who works there.

Sandpoint-based ASAP Tax Service buys VoIP service from Packet8, said Devin Furtwangler, president. VoIP doesn’t require investing thousands of dollars in a phone system, he said.

“What a great way to keep your costs down,” Furtwangler said. “It’s nice to see that we’ve got some options.”

ASAP Tax Service did need to boost its Internet connection speed to make VoIP work smoothly, Furtwangler said.

Matt Hill, senior account executive for Spokane-based B+C Telephone Inc., said he sometimes uses a VoIP phone to telecommute from home. A company receptionist can transfer calls to that phone, or talk to him through an intercom feature, he said.

Comcast plans to roll out a small-business voice service later this year, said spokesman Walter Neary.

Looking forward

Starting this fall, callers may have a new VoIP option from a Silicon Valley firm. Ooma Inc. will offer a $399 device resembling an answering machine that enables broadband customers to make free, unlimited domestic calls. It will also connect to a standard phone line, which can be used to make 911 calls.

The company says the device will operate on peer-to-peer technology, circumventing the traditional public phone network by using other Ooma users’ landlines to connect to the switching system. The system is currently undergoing invitation-only beta testing.

Dial-up Internet subscribers may also have access to VoIP through a Spokane-based startup planning to offer a special adapter that works over a standard phone line. Subscribers of Acellus Communications Inc., a dial-up Internet service provider, would keep their local phone service and use the company’s VoIP services for long-distance calls, said president Jeff Miller. The publicly held company plans to roll out the service in the next few months, Miller said.


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