Phones without borders

Imagine being able to use your home telephone line - at no cost - from abroad. It looks as though BT's 'broadband voice' service could catch on, says Michael Pollitt
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Have you ever made the mistake of replacing all the phones in the house with those oh-so convenient cordless models? Everything works just fine until the day you need to make an emergency call in a power cut. So why would you want to install a new BT telephone service that cannot dial 999 even if the electricity is on?

Have you ever made the mistake of replacing all the phones in the house with those oh-so convenient cordless models? Everything works just fine until the day you need to make an emergency call in a power cut. So why would you want to install a new BT telephone service that cannot dial 999 even if the electricity is on?

Yet, on the other hand, imagine this: taking a small box with you to a hotel in a foreign country, plugging it into a high-speed connector, and getting a UK dial tone - and then being able to make free calls from it. Both are possible with "broadband voice" - making calls using your high-speed link. For Henry Merriweather, a computer programmer who lives in Glasgow, the choice was simple. He uses Pipex broadband and needed another line for his in-laws.

"I looked at getting a second line from BT but there was a £75 installation charge plus rental. Then you have the BT Together options on top. It was going to be really quite expensive." Then he happened across something else: BT's "broadband voice" service, which uses the broadband link to encode the conversation using "Voice over Internet Protocol" (VoIP). Some local and national calls are free, while to other countries they are very cheap. "The quality has been excellent," Merriweather says. "Slightly better than a mobile phone, but not quite as good as a standard telephone."

Voice over an internet link? It's not as mad as it first seems. Promoted as a second line service after discussions with the former telecomms regulator Oftel (now replaced by Ofcom), BT broadband voice was launched last December. The reason: to try to win back customers lost since the late 1980s, when competition opened up BT lines to low-cost call providers. Since then the cable companies, NTL and Telewest, have grabbed around a fifth of the residential market, starving the former monopoly of lucrative rental and call charges.

Now add broadband into the equation. Of the five million UK broadband customers, well over one third use cable companies, whose increasingly popular "triple play" combination of phone, TV and internet makes it difficult for BT to win back telephony business - until now. But by using broadband, (VoIP) and an ordinary phone connected through an adaptor, BT now has a new weapon. Pierre Danon, chief executive of BT Retail, is bullish about the UK's first mass-market VoIP service. "Broadband voice takes the battle for customers right to the door of our rivals," he says.

"This offer combines innovation and value-for-money, and not only will it give cable customers an alternative voice line from BT for the first time, it will also provide them with savings of up to £109 a year on their phone calls." That's not how NTL sees it. The cable company has 2.5 million telephony customers, though it won't reveal how many use cable or BT lines. "BT has cherry-picked figures across the cable sector to make its case," an NTL spokesperson said. "We see its new service as extremely limited. We remain very confident in the overall value and quality of our services."

Telewest, which has around 1.6 million telephony customers and 400,000 broadband users, highlights the restrictions. For example, you can't call the operator, dial premium rate numbers and if auntie doesn't live in one of 17 specific countries, you will not be able to call her using BT's system. Will BT's usage of Telewest's network be disruptive? "Our customers will continue to receive a full range of broadband services, operating at optimum speeds," says Matthew Dearden, director of telephony at Telewest Broadband. "Beyond BT's hype, we believe consumers will soon realise the limitations. Our customers are already enjoying a high quality service at comparable calling rates."

All you require for BT's new second-line service is a broadband connection, Ethernet modem or router, plus a touch-tone telephone. For £7.50 per month, you'll gain a new "05" prefix number with optional features such as call forwarding.

Are there any drawbacks? Merriweather notes that some callers are wary of the 05 number he uses, mistaking it for a costly-to-call mobile. (In the summer Ofcom reserved the "056" prefix for VoIP numbers.) On the plus side, the household enjoys free evening and weekend calls on its new line. Merriweather has noticed poorer speech quality only once, when he was also downloading a file.

Cable phone user Dean Kelly in Telford runs BT's new service across 2 Mbps Telewest Blueyonder broadband. Kelly, who works in the IT industry, doesn't know anyone in Telford who has an ordinary BT line. There's no issue with call quality and he reckons it equals that of a landline.

One thing Kelly doesn't like is being unable to connect a fax machine: "If BT wants to attract business users it really needs to have a fax capability," he says. According to Dave Axam, General Manager for BT's Access Portfolio, that should be resolved in time. It's a question of data compression. For example, you can configure broadband voice for low-quality sounding calls at just 40 Kbps of bandwidth. If you want more natural clarity, use 100 Kbps.

Compare this to the typical downstream and upstream speeds for Tiscali at 150/256 Kbps, BT Broadband 512/256 Kbps and Telewest Blueyonder 2 Mbps/256 Kbps. But don't forget that conversations are two-way so the limitation is upstream. Kelly says that, even with several networked PCs sharing broadband, his phone usage is unaffected. He's also spotted two telephone sockets on the BT adaptor but one of them doesn't work.

If he can find out how, might a second line service become a two-line service? "We have that expansion built into the equipment and we'll make a decision whether we enable the second line or not," says Axam.

There's another hidden feature to challenge conventional thinking. Take the adaptor abroad, connect it to your hotel's broadband service and plug in a phone. You'll hear a UK dial tone enabling you to make - or receive - calls at UK rates. Describing it as the "spookiest thing in the world", Axam has phoned home from New York, Brussels and Paris. So why not promote it then? "That's one of the areas that we may well pursue as a market in its own right. For the business traveller, it's extremely useful," explains Axam.

But back to phone wars. If Telford is a Telewest town, is BT taking aim? Not so, says Axam while denying that the company is targeting any particular area. He prefers to talk about a competitive package of call charges that's attracting second-liners. "The service is available throughout the UK for anyone with a broadband connection. It's true that, because of the percentage of Ethernet in the cable base, there's a high adoption rate from cable customers," says Axam.

The analyst and consulting company, Ovum, thinks that the cable companies were taken by surprise. So will they retaliate by strangling BT's latest venture? "The cable companies' best long-term defence is to play clean and launch a competing service, either a competitive real second line plus calls bundle or a second line VoIP service of their own," says Ovum's Jan Dawson. Look what's happening in the US. Time Warner Cable and AT&T are playing catch-up with the broadband phone company, Vonage. Most significantly, Vonage, which has 80,000 customers, has a retailing deal with Amazon which, it claims, is easily extendable to Europe. And as broadband becomes more utility than novelty, BT's bold move may prime the market for everyone else.