(FORTUNE Magazine) – This past summer things looked pretty bleak for 8x8. Quarterly losses at the tiny Santa Clara, Calif., firm were $1.5 million on shrinking revenues of $1.6 million. Meanwhile the stock was stuck at around 50 cents. And in mid-July the company--which is involved in voice over Internet protocol (VOIP for short) telephony that allows consumers and companies to make cheap phone calls over the Internet--received notice from Nasdaq that it was on the verge of being delisted.

Six months later, 8x8's stock is up 836%. Another VOIP competitor, Deltathree, also unprofitable, has surged 218% since this summer, and equipment manufacturer VocalTec's stock has shot up 107% in the past two months. And it's not just startups that are jumping on this bandwagon. Late this fall telecom companies Qwest, AT&T, and SBC all announced plans to roll out VOIP. Not to be outdone, cable giants Cox Communications and Time Warner Cable also announced their own VOIP initiatives.

So are VOIP stocks part of another tech bubble along the lines of e-tailing and B2B software stocks? While the technology is eventually expected to dominate, widespread use is still at least five years away. "A lot of it is hype at this point," says Christine Hartman, research director of voice-over-packet markets for Probe Group. "It takes time to roll out these products and get customers." In fact, VOIP has been around for several years, and today fewer than 200,000 residential customers in the U.S. use it for their primary communications. Consumers need to first sign up for broadband Internet access to get VOIP (only 20% of the nation's households have done that); transmission often isn't as good as traditional phone services (but often better than wireless); and if the electricity goes out, so does VOIP.

Plus there are still many questions about how this market will be regulated. Traditional long-distance calls are expensive because operators have to pay regional Bells fees to zip calls along their networks. AT&T, for instance, pays more than $10 billion a year in access fees. But currently, operators using VOIP don't have to pay all those regional Bell access fees, and they also avoid taxes and government regulation because they aren't considered phone companies. Things began to heat up in December: A Minnesota judge stymied the state's attempt to regulate VOIP startup Vonage when he classified the company as an "information service" rather than as a telecom. And in recent weeks the Federal Communications Commission held its first hearing on VOIP. "The FCC has to come down on some key issues in VOIP," says Tom Valovic, program director for IP telephony at research firm IDC. "If it doesn't, we'll end up with a patchwork quilt of conflicting regulations in all 50 states." Right now 8x8 and its competitors are hoping to lure customers by offering calling plans at discounts of 25% to 30% from their traditional phone competitors' charges. If they have to start paying the same fees and taxes as telecoms, VOIP operators could lose their biggest advantage. --Julie Creswell