A lot has changed since we last tested Internet phone services 16 months ago ("Internet Phones: Clear Winners," May 2004). The Internet phone market, once the domain of scrappy startups like 8x8 and Vonage, has been invaded by telecommunications giants such as Comcast, Verizon, and--yes, Ma Bell herself--AT&T.
Simply put, Net phones are hot. Why? For consumers and small businesses, the price is right. An Internet phone service plan permitting unlimited calls to the United States and Canada costs as little as $20 per month, less than half of what you'd pay for a comparable landline plan.
We're not quite ready to ditch our landline phones, as VoIP still has some serious issues to resolve: problems with 911 service (see "E911: Coming to a VoIP Phone Near You"), installation hassles, power outages, dropped calls, and garbled and clipped sentences. Still, Net phone technology has improved dramatically since May of last year. We had far fewer setup problems this time around--installation woes are more the exception than the rule--and call quality showed marked improvement, approaching landline quality in many cases (except on weeknights, when Internet traffic tends to be busiest).
For the uninitiated, a brief primer: Internet phones work via your cable, DSL, or T1 broadband connection. They convert voice into data packets and route these packets over the Internet to a landline or cell phone (via a circuit-switched gateway) or travel the Net exclusively, if the person you're calling has the same service provider (Vonage-to-Vonage, for instance).
Unlike PC-based phone services such as Skype (see "Skype: Sorting Through the Hype"), Net phones don't depend on a computer to operate. You simply plug your home phone into a terminal adapter provided by your VoIP vendor (or into one you've bought at an electronics retailer such as Best Buy or Circuit City) and plug the adapter into a broadband modem/router. You can arrange to receive a terminal adapter when you sign up for service at a VoIP vendor's site, or you can buy an installation kit at retail.