Web phones: Less cost, more hassles
By Lucy Lazarony • Bankrate.com

A speedy Internet connection could be the answer to your long-distance calling needs.

More and more companies are offering a nifty Web phone service called VoIP, which stands for voice over Internet protocol.

With VoIP, phone calls get routed through a customer's broadband Internet connection.

"For people who make a lot of phone calls it could save them money," says Kenneth DeGraff, policy analyst at Consumers Union.

But there are also plenty of downsides involved with transforming a conventional telephone into an Internet phone. Before signing up for a Web phone service it's important to weigh the risks and tradeoffs carefully.

"Know what you're getting into," DeGraff says. "And recognize that there are some real risks along with the benefits."

Entering the world of VoIP is easy. Just sign up for the service and attach a modem-like device between your conventional telephone and your broadband connection and you're good to go.

With VoIP, each phone call you make is carried as packets of data over the Internet. For more information about the ins and outs of Internet phone service check out the consumer brochure on the subject from the Federal Communications Commission.

When you sign up for a Web phone service, you also gain a number of advanced calling features. You can filter, block, save and redirect your incoming calls anyway you want. You can even pick your own hold music.

"There are a lot of advanced features that VoIP has that regular landline phones don't have," says John Breyault, research associate at the Telecommunications Research and Action Center.

Some Web phone services will even let you pick your own area code.

Let's say you live in Los Angeles and have lots of friends and family in New York City. Sign up for a New York area code for your Web phone service and every incoming call from New York will be treated as a local call. That's a great deal for your pals in New York.

The price for all this gee-whiz phone technology is decidedly cheaper. A VoIP service plan with unlimited local and long-distance calling is about 30 percent cheaper than bundled services offered by traditional phone companies.

Someone with a broadband Internet connection who makes a couple of hours of long-distance calls each day with their landline phone could save some real cash by switching to a Web-based phone service.

But even though the price may be right, there are still plenty of downsides, both big and small, to consider.

First off, with a Web-based phone service, when your power goes out or your Internet connection goes out, your phone goes out.

A storm that knocks out your home's power will also knock out your Web phone service.

"That's a dangerous place to be in the case of an emergency," DeGraff says.

To combat this problem, you'll need to buy a battery backup to keep your phone and computer going during a blackout.

Calling 911 during an actual emergency may also be more difficult when you have a Web-based phone service. With a traditional phone line, emergency operators are alerted to your location as soon as you dial 911. This may not be the case with a Web-based phone service.

"Many of the enhanced 911 features don't work with VoIP service," DeGraff says.

With a Web-based phone service you may need to tell an emergency operator where you're located, which could be difficult during a medical emergency.

It's also important to realize that the voice quality in a Web-based phone call doesn't match the voice quality in a traditional landline call.

Even though the quality of VoIP calls has greatly improved, you may still experience some clipped calls, dropped calls and calls with echoes when using a VoIP phone.

"I still don't think the quality is on par with a wireline phone, but it's really close," Breyault says.

Trouble with your Internet connection will affect the sound quality of your phone calls. Call quality also varies between VoIP providers. It's important to shop carefully.

Be sure to study CNET.com reviews of VoIP service plans. Check out the VoIP forums at BroadbandReports.com to hear what Web-based phone customers really think about their phone service. Another great resource for information on everything VoIP is a blog called VoIPWatch.

Another inconvenience with Web-based phone service is that in many cases the service connects to only one phone in your house. This could be a hassle for households with two or more landline phones.

To get around this inconvenience, TRAC recommends hooking your VoIP adapter up to a cordless base station and placing several handsets around the house.

People interested in getting TiVo, a digital video recording service, may want to pass on VoIP. The initial set up for TiVo requires a standard telephone line. Get rid of your standard telephone line in favor of a Web-based phone service and you won't be able to sign up for TiVo.

Not deterred by the risks and small hassles associated with a Web-based phone service? Feel free to go full steam ahead into the world of VoIP. Just be sure to shop carefully.

VoIPchoices.com has a chart comparing residential VoIP offerings from Packet8, VoiceGlo, IConnectHere and Vonage.

TRAC offers a detailed chart comparing residential VoIP plans from AT&T, Broadvox Direct, Cablevision, Net2Phone, Packet8, Verizon, Voiceglo, VoicePulse and Vonage. The chart costs $3 when you order it online and $4 when you order it by snail mail.

When comparing VoIP plans, be sure to check out monthly plan fees, which can vary from $9.99 for basic service to $35 or more for unlimited local and long distance calling. You'll also want to check for installation fees and early termination fees.

If you don't need a broadband connection for your Internet needs, it's best to pass on the VoIP bandwagon. There are tons of ways to save money on long distance that don't require a more speedy Internet connection. An article from Bankrate.com on low-cost long distance will show you how.