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"Hey, it's Steve," I shouted into my PC's microphone. "No, cousin Steve." I tried again. "From California." I was trying to talk to Judy in Manhattan. There was silence. And static. Then an abrupt click. We were trying to talk via a free Internet phone call--saving a few bucks but not exactly having a swell time. You've heard the hype about making cheap--even free--phone calls over the Internet, right? Well, for the price of a Net connection, you can save a bundle on phone calls by using any of more than a dozen available services. With some of these services, you can chew the fat with your buddy anywhere in the United States for as long as you want, and it won't cost you a nickel. Or spend $5--about half AT&T's weekday rate--to talk to someone at your branch office in Japan for an hour.

But you pay a price for free phone calls. In most cases, you have to put up with inconsistent--and sometimes very poor--sound quality. And with a few of the freebies, you can't escape glaring ads on your computer screen.

Now You're Talking

Internet phones have been around for years. I tested nine of them in 1997, and seven of those nine are no longer alive and kicking. At the time I reviewed them, the phones weren't something I'd use regularly--and they definitely weren't good enough for business calls. Several factors contributed to their downfall: Sound quality was poor, and both parties had to be online and using the same software. On top of that, you couldn't call someone who used an ordinary phone.

Now there's a new generation of services for calling over the Internet. I spent a dizzying month testing ten Internet phone services (see the features chart below), along with other enterprises such as Web-based answering services (see "Get a Virtual Secretary Online"). I also experimented with a dozen PC headsets and Net2Phone's Yap Jack, a hardware gizmo that uses the Internet to make calls without a computer. And I asked more than 1000 members of my Pasadena Users Group for feedback on the Internet phones they use.

Internet phones have come a long way in three years. You can now call your Uncle Sal, who doesn't own a PC and never will. And the sound quality has improved. Sure, sometimes you sound like you're calling on a chintzy cell phone from a closet in Lithuania--with cotton in your mouth. But when Internet phones work perfectly, which happens about a third of the time, calls on at least two Net phone services (namely, Deltathree and I-Link's TalkFree) sound almost as good as if you were on a landline. And you'll definitely save money. Using Internet phones to call numbers within the United States--and to call many overseas countries--can't get any cheaper than free.

Would I use an Internet phone for business--say, trying to close a sale with a new client? Nope, the technology is still too unreliable. But with a little planning, the right equipment, and a few tricks, Net phones are reasonably serviceable for calling friends and family around the United States and in other parts of the world.

Farewell, Ma Bell?

As Internet phone services improve, the marketplace is starting to boom. Dataquest, a research firm in San Jose, California, estimates that the telephony market, a $255 million business in 1998, will jump in value to $21 billion by 2003. Microsoft is grabbing a big piece of the pie by offering Microsoft Network Messenger users free long-distance Internet calls to numbers within the United States and Canada, using Net2Phone's technology. Nonetheless, traditional phone companies probably won't start losing customers for quite some time.

Pull back the curtains--or wires--and the technology behind Internet phone calls is easy to understand. You speak into your computer's microphone or headset; a program then digitizes your voice, divides the words into data packets, and sends them hurtling through the Internet toward the person you're calling. When the transmission arrives at the other end, a matching program or a hardware device reassembles the packets, and your friend hears your disembodied voice. If all the packets make it through okay, you sound great; if not, your buddy will hear echoes, distortion, or worse audio glitches.