Cheaper CHATS.

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Author: Desmond, MichaelHebert, Amy Esbenshade

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VoIP services, such as AT&T CallVantage (www.callvantage.com), Verizon VoiceWing (www.voicewing.com) and Vonage (www.vonage.com), can cut a typical home-phone bill in half Vonage, for instance, charges $25 per month for unlimited local and long-distance calling in the U.S. and Canada. (CallVantage is $30 and Voice-Wing is $35 for a similar service.) By contrast, a typical Verizon plan costs around $30 for local calls only.

Smaller VoIP companies offer even greater savings. Packet8 (www.packet8.net), BroadVoice (www.broadvoice.com), Broadvox Direct (www.broadvoxdirect.com) and Lingo (www.lingo.com) ail tout $20 monthly plans that provide unlimited local and domestic long-distance calling.

One reason for VoIP's lower rates is the lack of government regulation. A typical phone bill is laden with cryptic taxes and surcharges that can cost $10 or more per month. Industry analysts expected state and federal governments to tax VoIP services, but the Federal Communications Commission ruled in November that states can't regulate Vonage-type services--though the FCC itself can. The decision should at least delay the adoption of VoIP taxes.

In the meantime, a price war is afoot. Since July, Vonage and CallVantage have cut rates on their unlimited long-distance plans by $5 per month, and Broadvox has dropped its monthly rates by $10. Andy Abramson, an industry watcher and publisher of the blog VoIP Watch, predicts $10 local and national service by year-end.

International callers may have more to gain from VoIP. Most VoIP services consider calls to Canada the same as domestic long distance. Some, such as Lingo and BroadVoice. offer unlimited dialing to much of Western Europe for $20 per month. Lingo's Unlimited Asia Plan ($35 per month) lets you make calls to neatly a dozen countries, including Australia and Japan.

Plenty of perks. VoIP services have other advantages. For example, there's remote phoning, which, in effect, lets you take your phone with you. Just unplug your VoIP adapter, tote it to that family reunion in Idaho, then plug it into your uncle's network. When someone calls your home number, the phone will ring in Boise--and no additional charges will apply. On any Web-connected computer, you can do things such as check voice-mail messages that arrive as e-mail attachments in your inbox or use a Web browser to change your call-forwarding settings.

Many VoIP providers offer call forwarding, call hunting (forwarding calls to a series of other numbers, such as your cell phone and work phone), conferencing and other features. In most cases, you'll get mote services in a VoIP package than from a traditional carrier, and at a lower price.

Strings attached. Against all these positives you'll need to weigh a few negatives. Subscribers typically pay a $20 to $40 activation fee, sometimes with an additional $10 to $15 shipping fee, and many providers levy a $40 to $60 cancellation fee if you stop the service within the first 12 months.

And VoIP performance is only as good as the cable or DSL service it runs on. If your service is spotty, so will be the quality of calls. For example, if you transfer a computer file while on a call, your voice may suddenly sound like one of the Chipmunks. Calls can even be lost in such a situation. Newer adapters do a better job of giving priority to voice traffic, but this can slow file transfers during a call. VoIP may be out of the question if your broadband service is sluggish or inconsistent. You can test your Internet connection at TestYourVoIP.com to see if your cable or DSL link makes the grade.

Many VoIP services offer only partial 911 emergency coverage, meaning that their calls will go through, but the only location information that operators will have is the address the number is registered under. With some services, users may not be able to dial 911 service at all. Providers are rolling out 911-compatibIe services and coverage is improving, but 911 support remains an issue for many subscribers.

When the power goes out, so will the phone adapter and modem. A back-up power supply used to protect desktop computers can keep you connected through power outages.

And keeping your phone number when you switch to a VoIP service can be a hassle. When von Buren tried to transfer his Verizon home-phone number to Vonage, the process took nearly two months. "The changeover period was a pain," he says, and during that time he had to pay for both services. Vonage offered him a credit, but that doesn't happen often. You also may not be able to retransfer your number should you decide to switch from one VoIP carrier to another or back to a traditional provider.

Finally, some devices that expect to call out on a phone line, such as a TiVo setup, can be confused by VoIP services. Check with a VoIP provider to see if your equipment will work before mailing the jump.

Despite these issues, call quality has improved to the point that most users won't notice the difference between their standard land line and an Internet phone service. Von Buren and his wife, Wilma, make many calls to Europe and Canada and are pleased with the quality and reliability.

Which service to choose? Because many are available across large parts of the U.S., you can often pick the one with the plan that suits you best. But as a rule of thumb, you'll have fewer problems (and less risk that your VoIP provider will fail) by sticking with the largest VoIP carriers, such as CallVantage and Vonage.

For tips on choosing the best VoIP service for you, see kiplinger.com/ magazine/links.

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By Michael Desmond and Amy Esbenshade Hebert, Research