Talk is cheap and sometimes you spend nothing

From Sipgate to Skype, Emma Lunn looks at internet phone services that are slashing call costs still further

The full name is ugly - Voice over Internet Protocol (VoIP) - but that hides an idea that is beautiful in its simplicity: the chance to log on to the web and chat to friends and family for next to nothing or, sometimes, nothing at all. Conventional landline deals are already highly competitive, but now they are in danger of being left behind.

Rather than pay to use home phone lines, VoIP routes calls via the internet instead. The anticipated demand has prompted companies to jockey for position.

Household names BT, Wanadoo and Dixons (under its parent DSG International), along with the lesser-known Skype (recently bought by online auction house eBay), are frantically offering cut-price deals to the growing number of customers keen to exploit the internet's potential to keep telephone call costs to an absolute minimum.

Search engine Google also plans to offer free phone calls over the web.

To take part, you'll need a broadband connection to download specialist software from the internet telephony company on to your computer.

You must also have headphones and a microphone that plug into your computer. Most PC packages come with these but, if not, they are easily available on the high street.

Using the software, type the recipient's number in on your keyboard and you'll hear a ringing tone several seconds later. You can then natter on the net as if making a regular call.

If both parties have signed up to the same VoIP deal, the call - no matter how long - is, in most cases, free.

Alternatively, if either of you is on a landline anywhere in the world, the calls cost as little as 0.5 pence per minute (see the table below). Use Skype for an hour-long chat with a friend in Canada, for example, and it will set you back just 72p

The rates are more expensive if you dial a mobile: a minute during the daytime to a phone on the Vodafone network costs 16p with Skype.

To pay for these calls, you'll usually need to subscribe with a credit card account - and there may also be a small rental charge.

"At the moment, there isn't a lot to distinguish between providers except for variations in call cost," says Blair Wadman of the price-comparison service uSwitch.com. "To start with, I would recommend people go for the better-known brands."

To help consumers, uSwitch is developing a service that compares VoIP providers. For now, it is looking at subscription rates, sign-up costs and daytime calls to UK landlines. "If you are only interested in making occasional computer-to-computer calls, packages such as BT's Communicator may be all you need," says Mr Wadman.

"But for computer-to-landline calls, signing up with Vonage, Gossiptel and Sipgate would be better."

There are other factors to watch out for, though.

Depending on how much you use the internet for pastimes such as music and film downloads, some broadband packages might restrict the amount of time you can spend talking.

For example, although more and more broadband deals offer unlimited downloads every month, some limit you to a set amount of material - two gigabytes' worth, say.

As a guide, a "medium" user who, on a daily basis, surfs the net for two hours, sends three emails, and downloads a one-minute video clip and two music files would have enough of his 2GB download limit left for a 30-minute chat every day.

You can also miss an incoming call if your computer is switched off, since several VoIP deals need you to keep your PC on in order to receive a call.

However, more now offer a "router" box into which you plug a telephone and take calls in the normal way, even when the computer is switched off.

Wanadoo, BT and Vonage all make this option available, the latter charging £9.99 a month for a service that includes free calls to other Vonage users and all UK landlines.

Last week, DSG International - the parent of Currys as well as Dixons - launched Freetalk. After buying a £79.99 adaptor box, users get free calls to UK landlines for a year, followed by a monthly £6.99 subscription.

Customers do not need to switch their PC on and simply plug their handset into the box.

Another downside of VoIP is that most packages don't allow 999 calls to emergency services. You will still need a normal landline or mobile for this.

Some providers also have a maximum call time, after which you are cut off and have to redial. For example, Wanadoo sets a limit of two hours and BT one hour.

Some traditional phone-line providers are sceptical about VoIP's future.

"The requirement for separate hardware is not going to be consumer friendly or feasible enough for a large part of the population at present," says Nicky Hall, head of telephony at the Post Office.

Others disagree.

Five months ago, Andrew Ferdinando switched from a landline deal to Vonage. The bill for his business and personal calls has dropped from between £60 and £100 a month to £9.99 - the monthly service charge.

"There's no need for a headset," he says. "I just plug the Vonage box into [my] normal telephone and use it in the normal way.

"It's also cheap to call overseas and you can check on the website how much it costs to call certain countries."