The New Phone
The Internet has finally found its voice, adding voice capabilities to instant messaging, gaming and even online dating. You can bet new revenue streams aren't far behind.
By Erick Schonfeld, Om Malik and Michael V. Copeland

(Business 2.0) - For nearly a century, the phone, and voice as we know it, have existed largely in the confines of a thin copper wire. But now service providers can convert voice calls into tiny Internet packets and let them loose on fast connections, thus mimicking the traditional voice experience without spending hundreds of millions on infrastructure. All you need are powerful--but cheap--computers running specialized software. The Next Net will be the new phone, creating fertile ground for new businesses.

Already, startups and incumbents alike are adding voice to hitherto deaf-and-mute computer applications. America Online, Apple (Research), Google (Research), Microsoft (Research), and Yahoo (Research) have all added voice to their instant-messaging clients. eBay (Research) bought Web-phone pioneer Skype for $2.6 billion last year; Skype, whose technology allows calls that cost a tiny fraction of what standard services cost, just added video calling to the mix.

But cheap calls are in many ways the least interesting part of the new phone. Marrying voice and the Internet makes the Web phone a powerful new platform for software applications. The Gizmo Project of MP3.com creator Michael Robertson's telephony startup, SIPphone, includes all sorts of software add-ons, such as conference calling, mapping, call-recording capabilities, and goofy sound effects. More important, the client is an open platform on which anyone can build apps.

Sometimes the new phone is just part of another Web application. For instance, startup Vivox is embedding its peer-to-peer voice technology into online videogames and dating services. In the dating application, those seeking soulmates can call each other anonymously from within the service and retain their privacy. And Canada's Iotum can route calls, e-mail, and IMs to whatever phone or computer you happen to be using. Adding voice to the Web can also potentially open up new revenue sources. Google (Research), for one, is experimenting with a form of pay-per-call advertising in which simultaneous calls are placed to both your phone and, say, the local movie theater or pizza parlor sponsoring the ad. Google can charge a lot more for a completed call than for a clicked-on text ad. Now that eBay owns Skype (and PayPal), it can do the same thing for its network of buyers and sellers.

THE NEW PHONE

Company: Fonality (Culver City, CA)

What It Is: Open-source telephony software

Next Net Bona Fides: It sells a $1,000 box that allows a PC to use open-source software to mimic a PBX system that costs five times as much.

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Company: SIPphone (San Diego)

What It Is: Internet phone software

Next Net Bona Fides: Its Gizmo Project application allows free PC-to-PC calls, cheap PC-to-phone calls, and sound effects.

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Company: Iotum (Ottawa, Ontario)

What It Is: Presence management software

Next Net Bona Fides: With its app, users will be able to control where and when they receive voice or text data, routing calls to their phones, e-mail, or RSS feed—and blocking calls from, say, creditors.

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Company: Vivox (Framingham, MA)

What It Is: Peer-to-peer voice technology

Next Net Bona Fides: Its service integrates voice, video, messaging, and social-networking capabilities into existing data networks.

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INCUMBENT TO WATCH

eBay (Skype). The pioneer in the field and still the front-runner, Skype brings together free calling, IM, and video calling over the Web; eBay will use it to create deeper connections between buyers and sellers.

INCUMBENT TO WATCH

eBay (Skype).

The pioneer in the field and still the front-runner, Skype brings together free calling, IM, and video calling over the Web; eBay will use it to create deeper connections between buyers and sellers. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.