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Voice over Internet service talks to consumers

Steep phone fees spur move to online voice calls

TOKYO, Japan (AP) –For years, the high cost of phone calls was the biggest obstacle to Internet growth. These days, that curse is proving to be a bit of a blessing.

As always-on broadband Internet service becomes more available, towering tariffs for traditional voice calls are encouraging adoption of a technology that has yet to make much headway with consumers elsewhere: voice over Internet.

More than 300,000 people have signed up for the service from BB Technologies Corp., a subsidiary of Tokyo Internet company Softbank Corp. That’s easily more than three times the estimated U.S. consumer market.

The service, which began in April, doesn’t require a new telephone. With a book-sized modem, one gets voice quality comparable to that of regular voice lines — at a fraction the cost.

Subscribers to Softbank’s Yahoo broadband Internet service get voice over Internet for free. Non-subscribers pay about $10 per month including modem rental after a $30 installation fee.

Users keep their same phone number. The broadband service is an asymmetric digital subscriber line that runs over existing wires. Customers still must pay a line fee that starts at about $13 a month to Nippon Telegraph and Telephone, the former state monopoly that still controls nearly all fixed lines to homes.

Saving on the service

Even so, callers can save drastically.

Although traditional phone fees are gradually coming down as the sector opens up to newcomers, a three-minute long-distance phone call in Japan still costs as much as 68 cents while the same call to New York costs $1.40.

With BB Phone, three-minute calls within Japan and to the United States cost 6 cents. The rates for calls to other countries vary but are all generally cheaper than old-style phone calls. Calls to another BB Phone are free.

A long-distance romance has Ayumu Mizuno, a 24-year-old engineer, sold on BB Phone. He expects to save hundreds of dollars in calls to his out-of-town girlfriend, who lives with her parents.

The service is in such demand that customers have complained about long waits for service and support. Another catch is that free calls happen rarely because BB Phones remain rare.

“It’s too bad I have no other BB Phone person to call,” said Yoshio Inohara, a 43-year-old electrician who switched to BB Phone last month. “The only BB Phone I’ve ever called is the support center.”

An online oven?

Softbank, which has invested $ 740 million to set up its broadband network, believes homes of the future will be linked over the Internet through all kinds of devices, not just telephones and computers but also home entertainment centers, ovens and refrigerators.

“The BB Phone is a result of the natural changes in technological advancement,” Softbank spokeswoman Misao Konishi said. “The market is certain to get bigger.”

Last year marked a period of explosive growth for broadband in Japan.

Half of Japanese households are already connected in some way to the Internet, up from just a quarter of households two years ago, according to InfoCom Research, a Tokyo company that compiles Net data.

Those using high-speed connections — including ADSL, cable and optical fiber — total 4 million people, or nearly 8 percent of Japanese households.

A recent study by the Nihon Keizai newspaper found 30-fold growth in high-speed digital connections in Japan over the 12 months ending in March.

Coming to America

Although some 12 million American homes have broadband connections, voice over Internet has not penetrated the U.S. consumer market nearly as well.

That’s primarily because basic phone service in the United States is relatively cheap, about $20 a month, said analyst Norm Bogen at Cahners In-stat. Besides, voice over Internet requires new equipment and service that are not as reliable as traditional voice calls, he said.

In larger U.S. companies, it’s a completely different story.

More than 40 percent of U.S. companies with 500 or more employees have begun converting to Internet-based telephony, according to the research and consulting firm InfoTech.

In Japan, the road ahead for BB Phone remains precarious despite its early success.

Telecom giants such as NTT and KDDI Corp. as well as other start-ups are beginning to offer rival services.

This month, NTT’s long-distance unit began offering a videophone feature for its Net phone service, which has attracted 13,000 users.

“NTT has marketing power,” says Shinji Moriyuki, analyst with Daiwa Institute of Research in Tokyo, adding that only the best of the efforts from smaller companies is likely to survive. “NTT may lose some market share, but not all ventures are going to succeed.”