VoIP (Voice over Internet Protocol) can save money on phone service because it uses the Internet to transmit calls rather than traditional phone lines. It's especially popular for people who have cable service, since digital phone service can be bundled with TV and/or Internet. Even if you keep a landline phone for local calls, experts say you can save a lot of money using VoIP for long-distance calls. However, there are caveats to consider -- and lots of fine print in most contracts.
There are two main categories of VoIP: hardware-based VoIP -- such as Vonage (*Est. $10 to $25 per month) and cable VoIP (*Est. $12 to $60 per month) -- and software-based VoIP such as Skype (free for PC-to-PC calls) and Google's Voice Calls from Gmail feature. Software-based VoIP makes phone calls directly from your computer; a microphone and headset will improve sound quality. Hardware-based VoIP uses a regular telephone and can work even when your computer is off -- as long as your broadband or cable connection is active.
Classic hardware-based VoIP runs via broadband connections. A converter box, called an analog terminal adapter (ATA), connects your phone to your broadband modem or router. The ATA is usually purchased when initiating the service, though rebates and promotional deals often cancel out the cost.
Cable VoIP also requires hardware, but the converter box, like a cable box, is leased (*Est. $3 per month). The digitized voice signal runs through the same cable wires as the TV and Internet services. Cable companies say this makes for fewer dropped connections and better call quality -- and many reviews and surveys agree. Some companies combine the converter and Internet modem in the same box.
Overall, reviewers say call quality tends to be more consistent with hardware-based VoIP -- especially cable VoIP -- than with software-based VoIP. Since most software-based VoIP is free or very inexpensive, reviews say it's still worth trying if you just want a supplement to your regular landline or cell phone service. With some providers -- Skype, for example -- calls are free only to users of the same service, but that's still a great deal for saving on long-distance rates. For calls to landline phones, rates can still be excellent, and international rates to landline phones are also cheap.
So is it worth it to ditch your landline for VoIP? Here's a rundown of the pros and cons.
- Cost savings over landline phone service
- Most include calls to Canada, Alaska, Hawaii and Puerto Rico
- Lots of free features (caller ID, call waiting, etc.)
- Low-cost international calls
- Virtual phone numbers
- Most offer a trial period
- Activation fees may apply
- Delays in local-number portability in some regions
- "Unlimited" plans may have usage caps
- No service during power outages in most cases
- Spotty voice quality in some cases
- Limited tech support for software VoIP
- Tricky self-installation
Reviews say you should consider the following when looking for VoIP service:
Keep in mind that you can, in most cases, take your VoIP phone number with you when you move or travel. All you need to do is set up the hardware adapter in the new location. For cable VoIP, this depends on whether or not your new address is served by the same company.
A major issue with VoIP has been whether or not it's dependable for 911 calls, especially now that most areas have enhanced E911 service that tells emergency personnel the caller's location. Software-based VoIP services such as Skype are not equipped to make 911 calls and can't replace a landline or cell phone for this purpose, but what about hardware-based VoIP?
Major hardware VoIP providers, including cable companies, Vonage and Ooma, are now compatible with E911 -- that is, your phone call will automatically give emergency responders your address, even if you can't speak (as long as your provider knows your correct location). The FCC publishes expert advice on VoIP and 911, with a link to a printable four-page PDF file.
Enhanced 911 (E911) calling works best from phones at a fixed location. Hence, landline phones and cable VoIP are most apt to give emergency personnel the correct address automatically. With other VoIP services, the user must be careful to keep the provider informed about the location from which it's being used. VoIP service moves when the user moves -- but the user might forget to notify the provider.
In addition to a working broadband connection, hardware-based VoIP requires electricity. With a landline you can plug in an analog phone and make calls even when the electricity is out. Cordless landline phones will not work in a power outage, since the base must be plugged into a wall outlet. To use VoIP during an outage, you need battery backup. Some cable VoIP providers, such as Comcast and Cox, include this as part of the equipment they supply. For most VoIP services, it's up to the user to buy and install a backup power supply. An October 2009 article in Popular Mechanics suggests buying a relatively small UPS (uninterruptible power supply) so you can use a hardware-based VoIP service even in a power outage. The author recommends a "relatively low-power 300- to 750-watt UPS" that would cost between $50 and $150.
There have also been reports of problems at the provider end in routing 911 calls to the correct emergency personnel. The FCC has tightened rules for VoIP providers to make it more likely that a call to E911 will go to the correct location. In addition, the FCC advises VoIP users to be aware of the limitations of 911 service with VoIP and to update their address promptly if they move. (See the Useful Links page.) Most experts advise having at least one other phone -- a cell phone or landline phone -- available for emergency calls.