It's not just for chat rooms. On the Internet, using your PC and the right software, you can call almost anywhere and talk as long as you like for no more than your Internet access fee--around $20 a month in the U.S. The audio quality isn't great, and you can speak only with other PC users running the same software. Yet there's probably some form of Internet phoning in your future, especially now that the two biggest players in the PC industry have thrown their muscle behind the concept. On July 17, Intel Corp. and Microsoft Corp. announced their backing of a set of key technical standards that may cause the nascent Internet telephony market to take off--eventually.

``LEADERSHIP.'' Until now, the software for Net phoning has been supplied mainly by startup companies with names such as VocalTec, NetSpeak, and VoxWare. But an absence of uniform technical standards left their products mutually incompatible. As a result, regular weekly usage of Net phoning has been limited to only about 30,000 hobbyists, estimates Jeffrey L. Pulver, president of Inc., a consulting firm. ``Intel and Microsoft backing a standard will greatly expand the market,'' Pulver says. ``This is the first time we've had leadership in the industry.''

Making the Intel-Microsoft standards likely to catch on is Microsoft's plan to build them into Windows 95. Once that happens, Pulver says, software makers will find it easy to build all sorts of Internet telephony products. Companies such as 3DO, Virgin Interactive, and Sierra On-Line have demonstrated computer games that let players verbally taunt each other--or collaborate against other teams--across the Net. Microsoft and others are developing programs that let groups of people concurrently view, edit, and discuss PC documents across virtually any distance.

Together, the companies active in Net phoning are ``creating a whole new telephone system,'' with even more functionality than standard phone equipment, says Robert Kennedy, president of NetSpeak Corp. NetSpeak itself is working on a Web-based call-distribution system to help catalog companies do business over the Web--in lieu of 1-800 lines. Besides routing incoming Net calls to operators, it will let them send Web pages back to customers while they talk.

GATEWAYS. The Intel-Microsoft alliance ``shows that [Net telephoning] is not just for hobbyists,'' says Elon A. Ganor, president of VocalTec Inc., whose $49 Internet Phone software is currently the market leader.

VocalTec, its many small rivals, and telephone-equipment companies such as Lucent Technologies, Ericsson, and Northern Telecom figure corporate buyers represent their largest market for Net-phoning products. They're scrambling to build hardware-based gateways that will allow people to dial and speak over a standard phone but have their calls transported over the Internet's low-cost links. As much as 16% of U.S. voice-traffic volume could be moving over the Internet by 2000, says Hilary Mine, an analyst at Probe Research.

Most of this traffic, she notes, will not replace traditional phoning. It will exist solely because Internet calling will be so inexpensive relative to standard phone rates. Make it cheaper, and people will buy more.

By John W. Verity in New York


Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.
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