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Telecommunications: An Easy Call

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Long-distance charges add up quickly at Atlantic Coast Federal, a Waycross, Ga.-based thrift with 14 offices in north Florida and south Georgia. Daily calls between distant branch offices, along with lots of incoming 800-number calls from customers to the thrift's call center, make up the bulk of the bill.

To cut costs, Atlantic Coast's senior vice president of central operations, Herman Klinger, began experimenting three years ago with sending voice calls over the internet. The cost was low, but Klinger and his employees were disappointed in the sound quality of that early version of voice over internet protocol (VoIP).

Klinger didn't give up on internet phone calls, however. This winter, Atlantic Coast will put in place a VoIP system from BellSouth that will cost the thrift around $450,000 over five years.

Despite the upfront expenses, Klinger's goal remains the same: Lower communications costs.

The difference this time is that a new generation of VoIP technology promises better transmission quality and new policies for prioritizing voice calls over a data network. "There has been a lot of hype about it," says Bill Makley, director of marketing for Siemens ICN in Boca Raton, a provider of VoIP equipment and services. He adds that now the technology is living up to the hype because it is offering the quality of service, reliability and security required by businesses.

VoIP works by converting voice into data packets that are then transmitted over a data network or broadband connection. That means that a company with both voice and data wiring can often eliminate the voice network, saving both employee maintenance time and equipment costs.

There are many other features, such as conference calls at the touch of a button and automatic retrieval of a customer's records when a company receives a customer call. But, as in Klinger's case, many companies are interested in the long-distance cost savings, called "toll bypass." With a VoIP network, a person in a company's Tampa office who calls someone in the company's Atlanta office would dial only an extension -- not a long-distance telephone number -- and connect directly to the Atlanta co-worker.

To upgrade to VoIP, a business needs software, some new hardware and internet protocol telephones -- which can be installed in phases according to employees' needs for the advanced communications.

For example, in a bank branch office, one or two IP phones could be used to call between branches while other non-IP phones would be used for local calls. IP phones can be purchased typically for $250 to $600 or leased.

Many communications companies, including local and long-distance carriers, cable and alternative telephone companies, are jumping onto the VoIP bandwagon. Verizon recently announced that it is ramping up the conversion of its nationwide wireline network to IP technology. "Our first target is the business market," says Stuart Elby, vice president of network architecture for Verizon. "It will work its way down to residential."

Some companies already are pitching IP telephone service to residential customers with a broadband connection. Vonage, a privately held New Jersey company that is a leader in VoIP, is offering a $14.95 per month package with 500 minutes of calling to anywhere in the U.S. plus a host of free features, including voicemail, caller ID, call waiting and many others.

For now, VoIP is not subject to federal or state regulation, taxes and surcharges. That's a cost savings that may not last, however. Says Verizon's Elby, "We believe in the end, the government is going to find a way to regulate voice."