Internet Calling Providers Sense Dark Clouds Looming

But improvements in the technology have taken hold recently, supporting innovative new services and efficiencies in the way phone calls are zipped around the world.

In the surest sign of the technology's progress, it is coming under increasing scrutiny from the nation's regional phone giants. Even as they explore ways to use the technology themselves, they are questioning whether Internet-routed calls should keep enjoying virtually no regulation.

Worried about the Bells' power and influence, AT&T and other companies that use the Internet to route calls have asked federal regulators to declare that they will maintain their hands-off approach to "voice over IP" technology.

The Federal Communications Commission plans to consider the question this year.

At stake, supporters of Internet calling say, is the ability for consumers and businesses to get more out of their phones for less.

"It's a very formidable time in the world of voice over IP," said Jeff Pulver, founder of Free World Dialup, which lets people with broadband connections talk to each other over the Internet without paying a cent. He estimates Free World has about 8,000 users.

"If there was ever a time to create some kind of safe haven for people who want to be innovative, I think that's now," Pulver said. "If we have to spend all our time fighting the status quo, nobody wins."

In the traditional phone system, calls are carried as electronic signals through dedicated switches and wires. Phone companies along the route get "access charges," a cut for calls that pass through.

With voice-over-Internet, conversations are converted into data, just like images and text in e-mails and Web pages. The packets of data take multiple routes through the Internet and are reassembled as a traditional phone call at a "gateway" near the destination.

The process permits new kinds of features, such as the ability to manage contacts and voice mail on the Web. It is inexpensive because access charges go out of the equation and "long distance" becomes irrelevant -- just as there's no extra cost to send e-mail to India instead of Indiana.

Last year, 10 percent of international phone traffic was carried over the Internet, up from 6 percent in 2001, according to research firm TeleGeography.

Most attempts by foreign governments to block the technology, including a recent stand in Panama, have failed. Meanwhile, broadband subscribers of Yahoo! Japan get Internet calling for free, and some Japanese services add videophone options.

Perhaps the technology's biggest threat to phone companies is its ability to let cable TV rivals eventually offer voice service along with TV programming and broadband Internet access -- a long-sought "triple play."

Even though that day remains a ways off, voice over IP already is causing static.

AT&T complained to the FCC in October that local companies were wrongly trying to slap access charges on Internet calls and sometimes refusing to complete them.

Lawrence Sarjeant of the United States Telecom Association, a trade group for local phone carriers, said AT&T should still pay access fees because it uses the traditional network to begin and end calls, even if it converts them to data in the middle.

A separate issue flared in November, when three of the four biggest phone companies -- BellSouth, Verizon and Qwest -- complained to an administrative council for phone numbers that Internet calling services would make numbers run out more quickly.

The companies noted that Vonage, which offers unlimited Internet calling and other features for $40 a month, lets users pick numbers that don't coincide with their physical location, possibly draining supposedly desirable area codes like 212 faster.

Considering that Vonage has only 10,000 subscribers -- and the total number of Americans who subscribe to Internet calling is estimated at just 100,000 -- the Bells' complaint was seen by some as foreshadowing a wider offensive.

Randy Sanders, director of regulatory issues for BellSouth, said the numbering filing was merely an attempt to clear up the role Internet services will play in the complex allocation of phone numbers. He said BellSouth might itself decide to offer Internet calling plans someday.

In fact, BellSouth recently ended an experiment in which it was reselling Vonage's service as "DSL Talking."

"We're not trying in any way to prevent these services from going forward," Sanders said. "I know we've been accused of that, but that's not the case."

The FCC will need to decide whether Internet calls ought to count as an "information service" or a "telecommunications service." Services in the latter category can be forced to connect to 911, contribute to a fund for subsidizing rural service or let law enforcement tap calls.

Net2Phone Inc., which hopes to be a voice-over-IP carrier for cable companies, already can link to 911 and let law enforcement listen, spokeswoman Sarah Hofstetter said.

Vonage expects to make 911 possible by April and "probably" could arrange for calls to intercepted by law enforcement, spokeswoman Brooke Schulz said, though no authorities have yet asked for it.