Talk Gets Cheap
Internet phone services promise Ma Bell quality at Taco Bell prices. Our tech expert's take on which one has the fewest hang-ups.
By Wilson Rothman

(MONEY Magazine) – Much to the telephone company's chagrin, there are now plenty of ways to get phone service for a fraction of the price you're used to. The cable industry is one new competitor, but the cheapest alternative is over the Internet.

Most Net phone services work just like regular phones do. You get a local number (in many cases, your old one). Sound quality and reliability are equal. The only difference is that you plug your phone into an adapter that connects to a cable or DSL modem. This does limit the number of places where you can set up your phone, but cordless users should have no problem.

Why switch? Price. Internet companies offer unlimited calls throughout the U.S. and Canada for $25 or less a month (including voice mail and caller ID). Unlimited international calling is also often available.

The most popular services right now are Vonage, Packet8, SunRocket and Skype. I set up all four and verified that they could replace my landline with no discernible downgrade in call quality.

Internet phone service doesn't work for everyone. You need a cable or DSL Internet provider, which can run $30 to $50 a month. Power and Internet outages will make your phone inoperable. Also, depending on your location and provider, 911 operators may not have your address when you call.

That said, these services still make good sense. The savings are considerable, many people already have cable or DSL Internet service, and after all, there can be a real joy in giving the phone company the heave-ho. Which one's best for you? Press 1 to continue.

Packet8

Packet8.net

WHAT YOU GET Packet8 charges $10 a month for unlimited domestic calling for the first three months, after which the fee goes to $20. There's also a $30 activation fee. Best deal: unlimited calling to more than 35 countries for $50 a month.

WHAT YOU NEED Packet8 ships you a free adapter for your old phone. For $80 (after a $110 rebate), you can get Uniden's compatible cordless phone, which doesn't require an adapter and is expandable without the need for extra phone jacks or Internet connections.

WHAT WE THINK For international callers who want something that resembles traditional phone service, this is a great bet. It's even a good value if you're only calling other parts of the U.S. Unfortunately, as with landline service, you are susceptible to fees and taxes that can add $2 to $3 to your monthly bill.

SunRocket

Sunrocket.com

WHAT YOU GET A one-year subscription for unlimited domestic calling costs $199, which works out to about $17 a month. Month-to-month service costs $25. Note that SunRocket is offered only where it can guarantee 911 service (which is where roughly 75% of Americans live).

WHAT YOU NEED When you sign up, SunRocket ships you its Gizmo phone adapter, which connects to your modem. You just plug your phone into the Gizmo and start gabbing.

WHAT WE THINK The lump-sum $199 service is a real value, especially since there are no surprise extra monthly taxes or fees, like those that appear on other Internet phone bills. There's no activation fee either. SunRocket is not available nationwide, but if you live in an area in which it's offered, it's a good choice.

Skype

Skype.com

WHAT YOU GET Skype offers free worldwide calling between PC users who have Skype's software. Think of it as a glorified instant messaging service (see the sidebar at right). If you want to call an actual phone, you need to pay. Calls cost 2¢ a minute, but you need to buy minutes in 10-hour blocks. To receive calls, you'll need a "SkypeIn" phone number, which runs about $36 a year or about $12 for three months.

WHAT YOU NEED For the free service, you need a PC, a microphone and some speakers, or you can buy a cordless handset from Skype. In the next few months, Netgear and Panasonic will introduce Wi-Fi handsets you can take with you.

WHAT WE THINK Skype is more for the tech-savvy, and it doesn't support 911 at all, so it's not for everyone. However, if you're reasonably technical (and keep a bare-bones landline as a backup), it's a great way to save a bundle.

Vonage

Vonage.com

WHAT YOU GET The country's largest Internet phone service provider has a $25-a-month unlimited domestic plan, as well as a $15-a-month plan that gives you 500 minutes of talk time.

WHAT YOU NEED In addition to the Vonage phone adapter, there are many new ways to connect to the service, including a Uniden cordless home phone and an upcoming Panasonic cordless system. The UTStarcom F1000 Wi-Fi phone ($130; rebates available) lets you make and receive Vonage calls anywhere you can access a Wi-Fi network, whether it's at home or on the road.

WHAT WE THINK Though it's not the cheapest, Vonage will have the most options this year, particularly if you like gadgets. Like Packet8, Vonage charges you fees each month, and there is a $30 activation charge.

Phone It In

New gear that helps you cut the cord

Uniden Internet Phone

($180; uniden.com)

No adapter required; plugs right into your modem. Extra handset is included so phone service can stretch throughout the house.

UTStarcom F1000

($130; vonage.com)

This portable handset can be used over Wi-Fi networks (in your home, at the coffee house, at airports). Exclusive to Vonage.

Motorola Wireless Internet Calling Kit

($100; radioshack.com)

Earpiece and PC adapter let you use Skype wirelessly. Earpiece also works with Bluetooth cell phones.

Phoenix Audio Duet

($200; phnxaudio.com)

Speakerphone for PC-based services; computer sounds are filtered out for clearer conference calls.

spend

New gear that helps you cut the cord 124

"Pod"-based coffeemakers 132

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.
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.