By Rafe Needleman and Felisa Yang
(May 5, 2004; updated May 6, 2005)

An Internet phone service uses the Internet, instead of old-fashioned phone lines, to send voice. In most cases, you just plug your current telephone into a small box that your Internet phone company provides to you. The box, in turn, plugs into your broadband connection. Just as with regular telephone service, you pick up the phone to get a dial tone and press numbers on the keypad to call the person you want to talk with. And as with a regular telephone, you can call anybody in the world who has a phone. Alternatively, some services have softphones: your computer becomes your telephone, and you talk via a handset or a headset plugged into USB ports.

It saves money
Since the old-fashioned phone system works fine for most people, why bother? There are two main reasons: cost and features. The most popular advantage of Internet telephones is that calls can be extremely cheap or even free to anywhere in the world. However, just as with ordinary phone services, it can be hard to figure out which companies offer the best savings for your particular calling habits. But if you regularly call a particular area (for example, a relative overseas), you can almost certainly find an Internet phone plan with rates that are incredibly low. And calling other users of your Internet phone system will likely be free.

Cost may or may not get you in the door to Internet calling, since for many people, regular calling plans could save a lot, too. Regardless, it's the features that really hook most Internet phone users. You can do things with an Internet phone service that no traditional phone can offer.

Pick your area code
Internet phones work independent of any local exchange, so you're not tied to any one area code. This means that you can take your phone number with you when you move; it's as easy as packing the adapter you get from your service provider. You don't have to end your old phone service in one city and go through the hassle of setting up service in another. And get this: with many systems, you also get a choice of area codes. You can be running a small business in rural Montana and have a high-rent, New York 212 area code, if you want.

You can also get great integration with your computers. Some systems send all your voicemail to your e-mail in-box and let you dial phone numbers directly from Outlook. And even the smallest company can set up a virtual phone system that spans offices (or home offices) yet functions very much like a phone system used by a corporation with dozens of worldwide offices. For example, a small business can get features such as simultaneous ringing, in which a call to your main number rings on all three of your employees' phones, even if some of them are not Internet phones.

Not as easy as a regular phone
At this point, though, Internet phone service isn't for everyone. While VoIP hardware and software isn't as complex and hard to set up as other standard office technologies--such as wireless networking--it's still not as hands-off as plain-old telephone service. And finally, the quality of VoIP is variable. In the best cases, it can be far superior to that of a regular phone, especially for international calls. However, if your call ends up routed over a congested portion of the Internet, quality can degrade, which manifests itself as an uncomfortable lag between two parties in a conversation.