By Bruce Mohl, Globe Staff, 02/11/99
When Robert Sanford of Marblehead calls his daughter in Florida, he doesn't use the regular phone lines.
Sanford, using a basic telephone, routes his call over an Internet system managed by AT&T and gets charged 7.5 cents a minute no matter what time of day he calls.
''It's very simple and the quality of the service is excellent,'' says Sanford, an international business consultant. ''I was amazed.''
Just like every other business in America, telephone companies are experimenting with the Internet as a vehicle for carrying phone traffic. So far the market is relatively tiny - sales of $500 million are forecasted for this year - but the efficiency of delivering phone conversations in the so-called Internet protocol, or IP, format is attracting a lot of interest.
AT&T is currently offering service in the Boston area and six other metropolitan areas. IDT Corp., a Hackensack, N.J., Internet service provider, is operating nationwide and has 250,000 customers. Qwest Communications and Sprint are not in the Boston area yet, but they are rolling out the technology.
For consumers, the attraction is price. Howard McNally, an AT&T vice president, calls Internet telephony fat-free long distance. The price is low, anywhere from 5 to 7.5 cents, but that price doesn't come easy. Consumers have to prepay their calls with a credit card and dial 31 numbers to place a call.
According to officials at companies experimenting with the Internet, the current market is geared heavily toward budget-minded customers and college students. ''Anyone who is frugal,'' McNally says. ''It's the person who would drive across town to save 2 cents on gasoline.''
The companies are able to offer the low rates because they don't have to pay the local phone company an access fee to start the call. That saves about 2 to 3 cents a minute. The companies also save on billing and customer service because calls are prepaid.
Typically, customers prepay for their calls in $25, $50 or $100 chunks. They can arrange to have their credit card automatically charged again when their balance runs low. To place a call, they punch in a local access number, dial their home phone number, a four-digit PIN number and then the number they are calling.
Voice processing equipment at the local access number converts the phone conversation into individual packets of digital information that are then routed over the Internet to the area to which the phone call was placed. Equipment there reassembles the packets of information, routes the call back on to local phone lines to the person being called. It all happens in a blink of an eye.
Some companies route their calls over the public Internet, but most companies are using private Internet networks. They say this gives them more control over the routing and the quality of the calls.
So far, growth in Internet calling has been steady but slow, primarily because Americans seem reluctant to prepay for phone service. But industry officials like McNally say the IP approach will pick up steam rapidly as more and more calls are carried over cable wires coming into homes.
The IP approach is considered a more efficient way of routing calls. Regular phone connections generally require a one-to-one connection that occupies a fixed amount of space on the phone network even if no one is talking. Under the IP approach, information travels in packets down several different Internet pathways to the ultimate destination, where they are reassembled. The technique uses up less space on the network and allows more calls to be handled.
AT&T, which is busy buying cable companies or partnering with them, plans to adopt the IP approach for all calls it handles over the cable wires coming into customer homes. AT&T officials say the IP approach will allow them to handle more calls efficiently and permit installation of more lines into a single home at reduced cost.
''We're betting the ranch on IP in the future,'' says AT&T spokesman Gary Morgenstern.
