VoIP

VoIP's biggest benefit is cost savings. Most VoIP service plans with unlimited calling start at about $25 per month, plus the cost of your broadband connection. Some services charge an activation fee (usually about $30). In addition, VoIP currently isn't subject to some of the taxes and regulatory fees that show up on most phone bills, and VoIP service is usually all-inclusive -- one price for local and long distance combined. You must still factor in the cost of paying for a broadband connection when using the services of companies like Vonage or Packet8.

In addition to cost savings, VoIP provides tools and perks that allow people to integrate their various messaging platforms, including voice, text and video. Some VoIP companies include conference calling and/or free international calls. And more companies like Vonage are offering free innovative features like weather alerts, current traffic information and even audio greeting cards. You also get repeat dialing and network-outage forwarding, which sends calls automatically to another number if the network is down.

While this has been a tough year for some VoIP providers, cable-company VoIP is surging. This year Comcast, with 3 million digital subscribers, breezed past Vonage as the number-one provider. Cable now accounts for 71 percent of the VoIP market, according to Barron's. Meanwhile, standalone companies like Vonage are seeing declines in subscribers.

Types of VoIP

There are two main categories of VoIP: hardware-based VoIP and software-based VoIP. Hardware services require a converter box (called an ATA -- analog terminal adapter) that connects your phone to your broadband modem or router; your computer does not have to be turned on to make and receive calls. Software VoIP works through your computer with a microphone and headphones, or a dedicated telephone-like handset, so your computer has to be on to receive calls.

Most hardware-based VoIP setups require only one additional piece of hardware -- the ATA -- which connects a traditional phone to your Internet connection. Most service providers include the ATA in their VoIP packages. In nearly every case (but not all), the adapter you use will be locked or password protected to correspond only with the service provider.

A second hardware-based option is an IP phone, which is similar in appearance to a standard telephone but includes a built-in ATA adapter. The IP phone connects directly to the router with a standard RJ-45 Ethernet connector. These phones are available in three different standards: MGCP (Media Gateway Control Protocol), H.323, and SIP (Session Initiation Protocol). SIP is the most popular type, and it is quickly becoming the standard. On the plus side, no computer or software is needed to use a SIP phone; the only requirement is a broadband Internet connection. More and more services, such as Vonage, offer a dedicated IP phone for use with their services for roughly $40.

Software-based VoIP works a little differently, and if you've ever tried Skype or another instant-messaging program with voice capabilities, it will sound familiar. The most basic software solution allows two people with the same installed software to call each other over the Internet for free. Rather than using a telephone, callers use speakers and a microphone connected to a computer, a headset or a dedicated VoIP phone.

Through the use of low-cost or free software and a few additional items such as a sound card, microphone and speakers, software-based VoIP is an inexpensive option. There are a few important catches, though. In most cases your PC must remain on to make or receive calls. In addition, free calls can only be made to and from people with the same software. Calling people with regular phones or cell phones costs extra on those products that allow it. Reviews say software-based VoIP is improving, but call quality is mixed. Often, voice quality is great to one country, but lousy to another.

Pros and cons of VoIP

Aside from the obvious cost benefit, you can do some neat tricks with your VoIP service. As stated above, many providers offer alternate numbers. And for an extra fee, you can have several numbers with different area codes. Theoretically, you could choose an area code and exchange in a state where most of your relatives live. That would allow them to call you for free, since to their phone company it would be a local call.

In most cases you can retain your current phone number (known as local number portability). But number portability can sometimes take extra processing time, so you shouldn't cancel your local phone service right away. The problem is that number portability is dependent on the complex and sometimes adversarial relationships between telecom companies.

While features like call waiting, call forwarding, voicemail and caller ID are added-cost items with traditional phone service, they are often included at no extra cost with VoIP. And VoIP companies are adding new features all the time, like call forwarding during power outages. Nearly all VoIP services include Alaska, Hawaii and usually both Canada and Puerto Rico. VoIP packages also generally include either a set number of minutes or unlimited calling. For people who spend more than $35 a month for local and long distance, experts say VoIP will save you money. About.com guide Nadeem Unuth cites a study that says that VoIP can potentially save you up to 40 percent on local calls and up to 90 percent on international calls, versus your phone company.

Be aware that emergency calls made through VoIP services are not always directed to traditional 911 PSAP (Public Safety Answering Point) venues that can identify your location. According to the FCC, some VoIP calls are correctly connected to PSAP, while others may not be connected. VoIP providers have been integrating technology called E911 (enhanced 911), so that emergency-center workers can identify a caller's location and phone number automatically. For E911 to work, you must register your physical address so that your VoIP number and physical address are associated in the E911 system, though.

Because not all VoIP 911 services work the same way, it's important to check with your provider. The FCC also has a consumer advisory at www.fcc.gov/cgb/consumerfacts/voip911.html. Consumer Reports and other analysts say you should consider keeping an active analog phone line available for emergencies. In addition, most VoIP services won't work in a power outage, though cable networks like Cox are embedding batteries in their modems so that phone service will stay on even if you lose power. Most VoIP services also won't work if your broadband connection is down.

As of yet, there is no VoIP-specific phone book, and VoIP phone numbers are not yet included in directory assistance. Your name may be listed, but the number will be unlisted. If you rely on having your phone number listed in directory assistance or the white pages of the phone book, you might see this as a problem. You'll still have access to directory service, sometimes for an additional fee.

You can still use your PC normally while making VoIP phone calls, but the computer does not need to be turned on to make calls unless you are using a software-only VoIP program. However, your broadband connection needs to be on and active. If you are using the hardware services, additional phones throughout your house can have access to VoIP by running a wire from a phone jack to the adapter. PC World and other reviewers found that voice quality can sometimes suffer while simultaneously downloading large files, especially video files, on the computer. Thus, About.com's Nadeem Unuth notes that VoIP call quality is highly dependent on your bandwidth.

Depending on the service, you may need to install the VoIP hardware yourself. Some companies do offer installation, and others -- such as cable companies -- require that they install the VoIP hardware. To set up VoIP yourself, you must have some computer savvy. About 40 percent of a group that installed their Internet phone themselves had problems, according to Consumer Reports, and they reported that setup could take over two hours. In PC Magazine's 2006 Readers' Choice survey, cable companies generally got the highest scores for ease of installation. In a PC World article on VoIP hardware, Jeff Bertolucci says that users should feel comfortable troubleshooting their home network since phones and routers sometimes need power cycling, which requires unplugging the adapter, waiting ten seconds, and then reconnecting.

Best VoIP service providers

Cox Communications Digital Telephone (*est. $40 per month for unlimited domestic calls) gets lots of great reviews and ranks highly with users in the Northeast, Southwest and West in the J.D. Power & Associates 2007 annual telephone provider survey. Extras, such as a log of incoming calls, call priority, three-way calling and caller ID, are included. E911 service is available for all subscribers. Though more expensive than some other options, Cox's digital phone service is still a better deal than paying for traditional local and long-distance phone service. Furthermore, Cox's service is different than some others in that you don't actually have to subscribe to a broadband Internet service to get digital phone service. The price for Cox Digital Telephone varies depending on where you live, but all prices drop when the phone service is bundled into a package with other Cox services such as television and Internet. Self-installation isn't an option, however, since a technician needs to install a special box outside your home (*est. $30 for installation).

If you live in the mid-Atlantic region, Cablevision's Optimum Voice (*est. $35 per month for unlimited calls to the U.S., Canada and Puerto Rico) sits at the very top of the J.D. Power survey for its excellent reliability and performance, as well as cost of service. E911 service is included and active upon installation, and calls are routed to local emergency call centers. However, Optimum Voice's digital phone is only available for customers of Cablevision's other services, though discounts off the base rate based on other services ordered are available.

While Cox Communications Digital Telephone and Cablevision's Optimum Voice are not available in all parts of the country, AT&T CallVantage is, and reviews say that it is worth considering. AT&T CallVantage includes an adapter, and in its unlimited plans, calls to Canada and Puerto Rico are also included. Features such as caller ID, call forwarding, conference calling, voicemail, call waiting and directory assistance are also included. CallVantage is compatible with fax; not all services allow you to set up a fax machine. International calls to landlines are charged per-minute, with rates ranging from 5¢ per minute to about 15¢ per minute. Calls to international cell phones cost quite a bit more, though. A local-only plan is also available for $20 per month. Like many services, AT&T charges a $30 activation fee. CallVantage works with any cable, DSL or fiberoptic broadband Internet connection, and you don't have to use AT&T as your Internet provider. E911 service is available.

Vonage is the most well known provider of VoIP, though its market share is declining. As noted earlier, Vonage's survival is in question after losing two substantial patent infringement cases filed by Verizon and Sprint Nextel. Even so, reviewers say Vonage is the best of the non-cable VoIP providers and its unlimited plan costs much less than others. If you don't make that many long-distance calls, a limited monthly minute plan will most likely be your cheapest option. Vonage offers the Basic 500, which includes 500 minutes of long distance (U.S., Canada and Puerto Rico) and local calls for about $15 per month. The Premium Unlimited plan is the same price as AT&T's unlimited option at $25. An ATA is included in both packages, although there's a $30 activation fee. Vonage doesn't have fax support natively, but you can add a fax line for an additional $10 per month, plus a $10 activation fee. Vonage gets high marks from reviewers for its voice quality. PC Magazine reviewer Rick Broida writes that "in weeks of testing I never experienced a single glitch or heard a trace of echo or static on my calls." His only complaint was that you can't select your own number at Vonage; it's assigned to you.

Vonage's unlimited plans include calls within the U.S., Canada and five European countries, but they do not include other international calls (most rates range from 5¢ to 30¢ per minute for international calling; calls to international cell phones cost more). There's also a wide variety of unique calling features, such as free weather and traffic alerts. Vonage says that it has E911 availability for most of its customers.

8x8 Packet8 (*est. $25 per month) is inexpensive, but usually ranks below Vonage in reviews. Its unlimited plan includes calls to Canada, Puerto Rico, Guam, U.S. Virgin Islands and five European countries. 8x8 Packet8 also offers E911 service, although it costs $2 per month extra. 8x8 Packet8 has a $30 unlimited global calling plan that includes 40 countries, such as Russia and China.

If you regularly make international calls, Lingo's unlimited plan (*est. $22 per month) is an option worth considering. Although this service scores below Vonage, particularly for voice quality, calls to 21 countries, including much of Western Europe, are included in the base price. There's also a nice menu of services, including voicemail by phone, e-mail and web; 411 assistance; speed dialing; call forwarding; online account management; and a free fax line. Lingo charges shipping, cancellation and activation fees, however. For a few dollars more, the better-rated Vonage has unlimited calling plans that include five European countries, plus call quality and reliability are considerably better.

Verizon VoiceWing (*est. $25 per month for calls within U.S., Puerto Rico and Canada) is the same price as AT&T's CallVantage, but some discounts may be available if you bundle VoiceWing with other Verizon services. You can use a fax machine, and E911 is available in most areas. One unique feature is a backup number in case of a power outage. At CNet.com, editors say Verizon's voice quality isn't up to par. Overall, reviews say VoiceWing may make sense for those who already use some Verizon services, since bundled pricing could save you some money.

VoIP PC-to-PC Calling

You can make Internet calls for free with some software applications. Previously, you needed a microphone (or phone headset) and speakers. But with more and more applications, you can now use your own phone or a special phone. EarthLink offers free Internet calls to other EarthLink members or to those who install the software. Also, a few new web-based companies let you use your regular phone to talk. Jajah.com offers free rates on international calls to 35 countries by simply connecting through its website. You type in the phone number you want to call; then the service actually calls you on your landline to connect the call. "It works reliably and the voice quality is good, but having to place calls on a Web site is a hassle," says David Pogue, technology columnist for The New York Times.

A new service called Ooma (*est. $400) adds a clever twist to VoIP free calls, say reviewers. If you buy an Ooma box (essentially a hub) for $400, you can make free calls to people in the U.S. at any time for no charge. You also get a free second line. New York Times reviewer David Pogue adds that the Ooma phone has a "fractional-second delay, much as cellphone calls and VoIP calls often do." On the downside, Pogue adds that if Ooma fails as a company, then you're stuck with a $400 box that's useless. Still, reviewers say that Ooma works well, and that it can cut phone bills in the long term. Ooma also acts as a hybrid, because you can call from your own phone.

The most popular free software VoIP service is Skype . With Skype, you can make free calls to anyone else who has installed the software, and you can even make conference calls to up to nine people. Skype also works as an instant-messaging service. Plus, Skype has an add-on plan called SkypeOut (*est. $30 for 12 months) that lets you make unlimited calls to regular phones through your computer within the U.S., Canada, and around 2¢ per minute to most of Europe, China, Argentina and Australia, with higher charges elsewhere. Its SkypeIn add-on assigns you a regular phone number -- then other people with regular phones can call you on your Skype account through your computer (*est. $60 for 12 months).

Skype has a big fan club among reviewers, who add that PC-to-PC call quality is usually good, but PC-to-phone call quality can vary greatly. Reviews note that Skype is a good value because it is free, fast and great for calling other Skype users. Skype isn't robust enough to replace your regular phone -- it's best as a cheap and fun way to make free Internet calls or low-cost international calls. Recently, several manufacturers -- including Philips, Netgear and Linksys -- have begun offering phones that let users connect to Skype without turning on their computers. Skype was in the news this summer when a massive system failure stranded users for over three days with no service. Some users say that since Skype's buyout by eBay, the service has gone downhill.

AOL Instant Messenger also offers voice and video chat features to other AIM users through its software, as do EarthLink, Google Talk and Yahoo! Messenger. Recently, T-Mobile began offering its HotSpot@home cell phones, where you can make unlimited free calls from a wireless hot spot or at home with your own Wi-Fi access. The voice plan costs an additional $10 per month for the service, however.

Important Features: VoIP

Reviews say you should consider the following when looking for VoIP service:

• Consider how many and what type of calls you make. Most VoIP services cost between $25 and $40 per month for unlimited local and long-distance calls in the U.S., and many include Canada and Puerto Rico. You'll need to assess what you're currently spending on local and long-distance calls to determine whether VoIP will save you money. Some plans, such as Vonage and Lingo, include some international calling, but be aware that only calls to landlines are included in their unlimited calling plans. Calls to international mobile phones cost more.

• Decide whether to keep your landline, and be sure to include that cost in your calculations. Because E911 service isn't yet universally available, experts say you should consider keeping a basic landline for emergencies. Be sure to include that cost in your usage estimates. In addition, a landline will still work during a power outage -- the majority of VoIP service will not. E911 availability depends on your location, so you'll have to verify availability with the VoIP company.

• Hidden costs. Most VoIP services include an adapter, but not all do, so be sure to check when comparing plans. Many services charge fees up-front for setup and/or shipping equipment. Also, be sure to determine the costs you will pay for international cell phone calls, which are not included even in all-inclusive overseas calling plans.

• Local number portability. Most companies allow customers to keep their original phone number, although sometimes it is not possible depending on the local service. In addition, it can take weeks to switch over your number, due to the adversarial relationships of many telecom companies.

• Alternate numbers. By choosing an area code separate from the one you live in, you may be able to save out-of-state friends and relatives some money. Keep in mind, however, that local calls will no longer be local if you have a different area code than your neighbors.

• Calling features. Additional features normally cost extra through your local phone company. But with VoIP services, these goodies are usually free. Features include call waiting, call forwarding, conference calling, voicemail, caller ID, an online call log, do-not-disturb setting and more. Vonage has added new, nifty features like weather and traffic alerts.

• 911 availability. E911 (enhanced 911 service) was supposed to be mandatory for VoIP providers as of November 28, 2005; however, some providers still don't offer it. That means that while some customers are now completely set up for E911 service, other subscribers are unknowingly signing up for new service with providers that either don't offer E911 or with providers that don't yet have E911 available in their area. Before considering VoIP as a replacement for a landline, be sure to find out whether you have full access to E911 service. Be aware that you must register your street address with the VoIP provider (you'll do this when you sign up). If you move, you must update your address so 911 services can find you at your new location.

• Compatibility with other equipment and services. For now, not all home security systems, TiVo boxes and satellite TV receivers work with VoIP, so you may not be able to retire your phone line if you use it for these purposes.

• Multiple lines. Multiple-line options are limited, since most services only allow one line per converter box, but some services have multi-line offers.

• Fax compatibility. Not all services support adding a fax machine. AT&T CallVantage, for example, does support fax machines. Vonage, however, charges an extra $10 a month for a separate fax line. Check first if this is important to you.

• Read the fine print. Check the cancellation policy. You will be refunded your money if you cancel within a specified minute usage and time frame. But you will still be charged for calls not included in your plan, as well as for directory assistance, international cellular calls and possibly for deactivation fees and shipping charges to return equipment.

Keep in mind that you can 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.

Our Consensus Report shows how many times products are top-ranked by reviewers included in our
All The Reviews Reviewed chart.

# of Picks	Service	Price
3	Cox Digital Telephone	(*est. $40 per month for unlimited local and domestic long distance)
2	AT&T CallVantage	(*est. $25 per month for unlimited local and long distance to U.S., Canada and Puerto Rico)
2	Skype	Free for PC-to-PC calling
1 each	8x8 Packet8 , Vonage, Cablevision Optimum Voice, Time Warner Cable Digital Phone, Bright House, WOW, Verizon VoiceWing , Lingo , Ooma

Cox Communications Digital Telephone gets the best reviews for reliability and performance, but its unlimited service is expensive compared to others, and it is only available in areas served by Cox Communications. If you already subscribe to other Cox services, you can save some money by bundling them with VoIP. AT&T CallVantage is available on any cable, DSL or fiberoptic broadband connection. It is less expensive than Cox. Its reviews for voice quality and customer service are higher than most other VoIP players like Packet8 or Lingo. Vonage has a hazy future due to lawsuits waged by Verizon and Sprint Nextel. Skype is a good option for free VoIP calls over your computer, but it can't replace your phone service completely.

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