Internet Telephones Not Paying Off

As the old saying goes: "You get what you pay for." So goes Internet telephone technology. Placing a call over the Internet is inexpensive pennies compared with the dollars spent on traditional telephone lines but the quality of the connection is often poor, sometimes inaudible.

"Part of the problem is lack of transmission speed -- that's why the connection is poor," according to Joe Outlaw, an analyst at Datapro Information Services Group in Delran, New Jersey. A typical Internet connection is made at 14.4K bits per second or 28.8K bits per second, with average transfer rates between 1,500 and 3,000 bytes per second. Traditional telephone transmissions are about 8,000 bytes per second.

However, improvements in the coder/decoder (codec) software, which decodes the compressed signal at the destination site, are being made, Outlaw says. "As the codec gets better, the Internet quality will get better," he says.

Another problem is that talking on an Internet phone can be more akin to talking on a shortwave radio -- only one person can talk at a time, or conversations overlap.

The reason: Most sound cards in desktop computers are half-duplex; traditional telephones are full-duplex. But a handful of vendors, including Quarterdeck Corp. and VocalTec Inc., feature full-duplex software. Because of other factors, such as transmission speed and codec, the connection still isn't as good as a traditional phone, but it's greatly improved, analysts say.

More limiting than speed and sound for many users is the fact that they can connect only with users of the same Internet phone software. However, most analysts are betting that the emerging standard for low bandwidth, H.323, will make lack of interoperability a thing of the past. Intel Corp.'s Internet phone software currently supports H.323, and IBM, Microsoft Corp. and others say they'll support the standard in future products.

Although there has been some commotion from the telephone companies about the use of Internet phones, the impact on phone companies will be marginal, according to Mark Winther, an analyst at IDC/Link, a consultancy in New York.

But analysts agree that despite the shortcomings of Internet phones, quality will improve and fuel widespread use within corporations.

Fewer than 500,000 people make Internet phone calls regularly, Winther says, but that number is expected to rise to 16 million users by 1999. International Data Corp., a market research firm in Framingham, Massachusetts, estimates that by 2000 as much as 16 percent of all phone calls will be made via the Internet.

The use of Internet phones today is mostly for hobbyists. For most businesses, the low cost isn't enough to compensate for poor quality.

"As the technology becomes fine-tuned, the industry will see Internet videoconferencing, and with it, shared whiteboards, chat, file transfer and audioconferencing," says Jeff Pulver, an analyst at Pulver.com Inc. in Great Neck, New York. Internet phones will "reinvent the party line," he says. Users eventually will talk from computer-to-computer, computer-to-phone and phone-to-phone using the Internet.

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