If you wanted to call a friend back in the oldest days of the telecom business, you had one option: You made a call over the line AT&T (T) wired into your house, using the phone that you rented from Ma Bell.
How times have changed. Today, choices abound. In addition to standard wire-line service, consumers can make calls wirelessly, over cable networks, or DSL broadband lines.
And prices are plummeting. On May 17, Cablevision (CVC), a relatively new entrant into the telephone business, announced it would offer international calls to any country in the world for 4 cents a minute. Skype, which lets users make phone calls over the Internet with their computers, announced on May 15 that calls to standard phones in the U.S. and Canada would be free, instead of the 2 cents a minute it previously charged (see BW Online, 5/16/06, "Skype Goes for Broke").
NOT TOO DEEP. The change is profound. Almost any company can get into the telecom business these days, a far cry from the days of Ma Bell's monopoly. The result is a free-for-all. Talk is getting cheaper or even free. And the extra bells and whistles are getting too numerous to count.
"With all the alternatives around, everyone including the established telecom companies have had to drop prices because of the competitive pressure," says Jan Dawson, a telecom analyst with Ovum RHK.
So what choices do you have if you want to make a call on the cheap? Here at BusinessWeek Online we've put together seven ways to reach out and touch someone without reaching too deep into your wallet:
1. Bargain-Basement Internet Phone Calls It doesn't get much cheaper than Skype. Under the company's new plan, all outbound calls to the U.S. and Canada are free of charge, whether it's to a regular landline, a cell phone, or another Skype user. For a fee of about $40 a year, the Skype service also lets you have your own phone number that anyone can dial into.
Services like Skype are not for everyone, however. Typical users communicate sitting in front of a computer with a headset and microphone, or with a USB handset that plugs into your computer (although it looks like a typical phone, you might not hear a dial tone, and it won't plug into a normal phone jack). Headsets on the Skype site retail for about $85, and the USB phone for $37. Skype also offers a videoconferencing feature, and sells Webcams for video calls for about $35.
2. Wi-Fi Phones These nifty handsets look just like cell phones. But rather than connecting through the network of a wireless provider like Verizon (VZ) or T-Mobile, these phones tap into any Wi-Fi wireless hotspot. They route calls through a VOIP (Voice Over Internet Protocol) provider like Skype or Vonage, meaning you can use them on the go with an existing VOIP account.
It's still early days for these models, and there are nowhere near enough free wireless hotspots to make the Wi-Fi sets as dependable as a cell phone. You need to pay for a Wi-Fi service, like the $30-a-month plan from T-Mobile and Starbucks (SBUX), to really be able to use your phone out and about. While the phones retail for as much as $250, and the service is dependent on reasonable Wi-Fi coverage, it could make a nice extension for a VOIP subscriber in the near future.
3. Instant-Messenger Click-to-Call An even simpler way to make phone calls is with an instant-message service like Google (GOOG) Talk or AOL (TWX) Instant Messenger. As with Skype, you'll need a microphone or headset that plugs into a computer, and most of the services only work with other users of the software who happen to be online.
AOL recently made it possible to receive incoming calls from regular phones for free. But for quick chats with your friends, the voice feature on these IM programs is free and easy, and probably already installed on your computer and ready to use.
4. "Premium" VOIP While more expensive than Skype, VOIP services like Vonage and Cablevision's Optimum Voice can be a good solution for people who'd rather not be chained to a computer for calls. For $20 to $40 a month, these services come with a piece of hardware that connects any normal landline phone to your broadband router, making the experience nearly identical to traditional phoning.
In fact, even telecom companies AT&T and Verizon (VZ) are getting in on the party and offering their own VOIP services. AT&T's CallVantage and Verizon Voicewing both offer plans for $30 a month.
Still, they're not always perfect. Vonage has been prone to service disruptions, and a cable-based VOIP like Optimum Voice will go out whenever the cable does. Meanwhile, it's important to check whether the service works with 911, because not all services are traceable, says Consumer Reports Magazine Editor-at-Large Greg Daugherty: "These can save you a lot of money -- but our recommendation is still to keep a bare-bones wire-line plan in case of emergencies."
5. PhoneGnome Those looking to save money without giving up a landline should look at PhoneGnome. Plug any standard phone into the little $120 PhoneGnome box, and it will make calls over Skype or another VOIP network while using your existing home phone number.
That means people can call you as they always have, but when you call them, the call will be routed over the Internet, saving you money if you have a per-minute plan with your local provider. PhoneGnome offers unlimited calls in the U.S. and Canada for $15 a month.
6. Pay-as-You-Go Mobile Phones While monthly wireless calling plans offer relatively low rates, they also lock you into a recurring monthly fee. Pay-as-you-go mobile phones can offer an economical alternative. The per-minute charge is higher than the one on a monthly wireless plan, but you can save money if you mostly want a cellular phone for emergencies. All the major carriers sell pay-as-you-go plans and phones, as do independents like Virgin Mobile or Boost.
7. Internet Phone Cards Finally, there's the good old-fashioned phone card. Phone-card companies save money by figuring out the cheapest routes for reaching a specific region or country, and then passing on most of the savings to their customers. If you're looking to call a specific country often, a phone card may still be the best option.
The best way to get one is through a little online research. Hundreds of Internet-based "cards" -- usually just an 800 number and a pass code -- exist, and prices can be extremely low. With the companies looking for the cheapest way to get your voice across the ocean, service can sometimes be spotty, and it's difficult to know which services will work the best. But with big discounts and no long-term commitment, an Internet phone card can be worth the gamble. Click here for the slide show
Helm is a reporter for BusinessWeek Online in New York
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