Why did internet telephony fail to grab the public's interest?

About four years ago internet telephony, or voice-over-internet-protocol (VoIP) was all the rage among technology companies. The idea was that we would ditch our phone lines in favour of internet connections, and talk to people over the internet using web phone handsets instead of standard phones.

But it hasn’t quite worked out that way. The amount we spend on fixed-line telephone calls has been steadily decreasing for years, but that hasn’t translated into everyone making calls online.

The big name from back then, Skype, is still going strong but others have fallen by the wayside. As the operator of most of the UK’s landlines, BT had a lot to lose from internet telephony but that didn’t stop it setting up its own VoIP service in 2006. It lasted five years before closing in February with BT saying people “don’t care” about the technology.

So, is VoIP faltering or is there a future in internet telephony?

What is VoIP?
VoIP calls can be made from any device attached to a broadband router. In the early days of VoIP this meant a computer, but now most services offer a proper phone handset that plugs into the router. Calls to users over the web are usually free, with charges for calls to or from landline or mobile phones.

When BT released its Home Hub router in February 2011 it decided to kill off the Broadband Talk service. This allowed customers to make cheap calls to landlines and mobiles through a separate internet-connected phone attached to their router, or by using software installed on a computer.

At the time of closing the service, BT said the cost of its VoIP service was no longer significantly cheaper than normal calls because the cost of calls to mobile phones and international numbers has dropped significantly. Calling-card and dial-in networks routinely offer rates similar to those available using VoIP.

Cost benefits
Sales engineer, Henning Kroll, of router maker AVM, told us: “Back in 2002 or 2003 VoIP was actually an alternative to landline networks in respect to price. Nowadays if you look at pricing you may as well use a landline with a calling card number. So now it’s not about price any more and it hasn’t been for a long time.”

AVM still puts VoIP technology in its routers, however, so what does it see in VoIP? Mr Kroll said: “You can take your number with you anywhere you want, and you can have two or four or eight calls at one time. You are not as limited as you are with a landline.”

Most home users wouldn’t need four or eight phone lines but businesses do and that’s where the real growth in internet telephony has been.

But there are still viable VoIP services for home users – many of which use a standard called Sip (Session Initiation Protocol) so they are compatible with each other – such as Freespeech. Another alternative is the American company Vonage, and for secure calls the heavily encrypted Zfone is good.

Skype
The big name in the business is Skype, around which an industry of add-ons grew. It was once possible to choose from a huge range of Skype handsets for more comfortable talking, and Skype phones for call-making without using a PC.

But such phones have become rarer. Skype said two were still on sale: the two-year-old Philips VOIP855 and the RTX Dualphone 3088, which was released in 2006, an age ago in computing terms.

We asked Philips if it would be making a replacement for the VOIP855 and it said: “Philips continues to offer a Skype phone but it remains a niche product aimed at consumers with very specific requirements.”

Belkin also used to make Skype phones, but it told us: “The Skype phones were products we had great press interest in but the demand from retail wasn’t huge.”

Skype has been working on other areas, such as its mobile phone apps, and video calling – two in five calls between Skype users from October to December 2010 used video.

Microsoft has announced it is buying Skype for $8.5bn (£5.2bn). It says it will bring Skype to its Xbox 360 console and connect it to the Outlook email program among other plans.

Our verdict
The early promises made by some VoIP providers haven’t come to pass, but while internet calling may be a niche product for home users, it’s big news for businesses that can use it to cut costs and be more flexible.

At home too, it will continue to make inroads – as AVM’s Henning Kroll says: “In the next few years when you have a gigabit connection to your house, will you still have the two-core copper line for voice calls? Probably not.”