Dial for Discounts

VoIP promises a slew of fresh messaging options to boost your productivity--and save you money.
Magazine Contributor
5 min read

This story appears in the March 2004 issue of Entrepreneur. Subscribe »

Are you still paying high phone charges? Want to save money? Cut-rate phone service over the Internet, or VoIP, is the next big thing-and not just for computer enthusiasts. IP telephony promises considerable savings for entrepreneurs, too, turning a highly variable cost into a much smaller and more predictable line item.

And long-distance savings are just for starters. As we morph from the Information Age to the Communications Age, new messaging technologies will give us our next big productivity bump across all industries. How about incoming calls that follow you anywhere? Or the ability to mingle and redirect voice, fax, e-mail and IM from a Web page? How about free four-digit calling and teleconferencing among branch offices? Anything in that mix that could save you time?

Conveniences like these have long been promised by old-line telephone companies over the Public Switched Telephone Network (PSTN) but never delivered at a price small and midsize businesses could afford or in a way the average human could use. But they're part and parcel of IP systems that treat voice as data and take advantage of in-place computer networks wherever possible. The IP-based office phone systems of companies like Avaya and Cisco Systems (see "Digital Edge," July 2003) routinely deliver extra functionality at the office. And software that lets you make IP phone calls with a computer is extending the messaging options of road warriors logging on through Wi-Fi hot spots (see "Connections").

But to get the really big savings, you need VoIP phone service from a provider such as GoBeam, Net2Phone, Packet8 or Vonage. These services require very little upfront investment-maybe a software gateway if you have a digital PBX or IP phones, or digital converters for your PSTN phones if you don't. Depending on employee head count, you may need a slightly faster Internet connection to ensure true, business-class call quality at peak load. VoIP providers or their resellers can work out the details.

Pricing plans are still very much in flux. Net2Phone takes a familiar approach-free local and Internet-only calling after the purchase of a gateway; then, domestic long-distance calls to PSTN phones are 2 cents per minute. When similarly discounted international calling is added, the typical business phone bill can be lowered 25 to 50 percent per month, says president Bryan Wiener.

Also familiar are Packet8's bucket-of-minutes plans. Each employee is given 4,000 minutes for $60 or 10,000 minutes for $130, monthly. You're charged for minutes only when a call connects to a PSTN or a cell phone. Vonage offers a smaller bucket of 1,500 minutes for $40 per month per employee as well as an increasingly popular all-you-can-eat plan. Both Vonage and GoBeam offer unlimited nationwide calling for $50 per month per employee. Ken Macias, founder of Macias, Gini & Co.LLP in Sacramento, California, reports that he cut the phone bill of his 90-person accounting firm by about 60 percent with GoBeam.

International calling to regular phones is extra but deeply discounted. Vonage and Packet8 throw in the digital adapter needed to turn a standard telephone into an IP phone, a savings of $75 to $150 per employee.

Productivity Enhancers

VoIP services can also save you money in less obvious ways. They usually bundle different combinations of services that traditionally cost extra, such as a free fax line, caller ID, call forwarding, three-way calling and voice mail.

Of course, if there's a power failure, your phone service could go down with your Internet connection. And it could be years before VoIP offers the ubiquity of PSTN in terms of directory, information, emergency services or area code choices. But VoIP providers try to be flexible, so you still might be able to pick a preferred area code or add "local" lines in area codes more convenient to customers or partners. For example, set up a local number in New York so customers can make free IP calls to your office in California.

Cost savings aside, four-digit dialing and no-hassle teleconferencing alone provide a big productivity boost for employees in Macias, Gini & Co.'s four offices-and even outside the office. Employees change their calling preferences on the fly, have calls follow them to four different phone numbers, or roll all but calls from VIPs into voice mail. Messages can be retrieved in any order from a Web log and redialed with a mouse click. Voice mail and faxes can be forwarded as e-mail attachments.

"It facilitates the virtual office," notes Macias, 47. "Our employees are out in the field so much, we don't even need an office for everyone."

This is just a taste of what would be possible with an all-IP phone network worldwide, but that's years away, says Daryl Schoolar, senior analyst with digital communications market research firm In-Stat/MDRin Scottsdale, Arizona. He expects 2.2 million American businesses to be using VoIP by 2007, but says PSTN and cellular phones will still dominate for years.

One unknown is the degree to which regulators will become involved, possibly slowing both price competition and IP phone innovation. Providers hope enthusiastic customer testimonials will induce regulators to follow the Internet model so the new industry can get on its feet.

"All I know is that it works, and I'm happy with it," concludes Macias. "It's everything we hoped it would be."

These plans include free or low-cost calling worldwide between IP-capable phones over the Internet:
  • GoBeam (www.gobeam.com/home.html):
  • Unlimited nationwide calling for $40 or $50 per month per line, depending on employee count
  • Net2Phone (www.net2phone.com):
  • Free local calling; domestic long distance at 2 cents per minute after buying a software gateway, which starts at $550 for 40 employees
  • Packet8 (www.packet8.net):
  • Buckets of minutes-4,000 for $60 or 10,000 for $130 monthly-counted only for calls that travel over PSTN; free phone adapter
  • Vonage (www.vonage.com):
  • Unlimited domestic calling for $50 per month or 1,500 minutes for $40 per month per employee; free digital phone adapter

Mike Hogan is Entrepreneur's technology editor. Write to him at mhogan@entrepreneur.com.

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