By
Howard Wolinsky
Save
your nickels: Free phone calls clicks away
Talk
about friends and family.
Long-distance
phone companies have been touting bargain rates, such as 10 cents a
minute to England and 17 cents a minute to Germany. But Evanston-based
Go2Call.com beats them with the ultimate rate: free.
Go2Call.com
offers calls to England, France and
Germany over the Internet. Within weeks, the start-up is expanding to
free calls in the United States and Canada, and by the end of the
year, it plans to be in 10 countries, covering two-thirds of Internet
users worldwide.
The
company was started by John Nix, 31, and Larry Spear, 33, who met in a
class on venture capital at Northwestern University's Kellogg Graduate
School of Management in 1998. Today, their partnership, which is
expected to break even this year, is aiming to take the Internet
calling world by storm.
Mark
Koulogeorge, who is in charge of the Internet practice at First
Analysis Venture Capital in Chicago, which backed Go2Call with a $3
million investment in January, said, "Go2Call hits the
intersection of telecommunications and the Internet, which is
technologically very interesting, and from a consumer perspective is
very dynamic. Free calling, just like free e-mail with Hotmail and
other folks, is very compelling."
Free
calling over the Internet, from computer to computer, has been
available for several years, but usage was confined to hobbyists
willing to put up with poor-quality calls and hard-to-configure
software.
The
big breakthrough came about eight months ago, when Dialpad.com began
offering free Web-based calling, which does not require users to
download and configure software. Additionally, Silicon Valley-based
Dialpad connects users with multimedia computers--those equipped with
speaker or headphone and microphone--to call telephones anywhere in
the United States free as long they wish.
Internet
callers use their mouses or keyboards to click on a dial pad on the
monitor. Software digitizes their voices, and sends packets of data
skittering over the Web.
More
than 7 million people have signed on with Dialpad. The service has
been so popular that some colleges have banned its use because it
soaked up so much computer capacity.
By
the end of the year, 20 million people are expected to be using free
Internet calling services, and analysts estimate that will grow to 229
million by 2004.
Spear
and Nix are aiming to out-dial Dialpad.
Nix,
who earned a physics degree and logged time in the telecommunications
industry, including Chicago-based Focal Communications, and Spear, who
has an engineering degree, believe their system's architecture is
superior to the competition's.
Nix
designed the system to make the fewest "hops" possible over
the Internet to connect a call, thereby improving sound quality.
"With
a good connection, the calls sound like regular phone calls,"
said Spear.
Tom
Dillon, an analyst with Current Analysis in London, said,
"Go2Call has gone some way toward reducing the inhibiting factor
[for using Internet telephone service] of poorly designed user
interfaces, which have prevented the more technically shy from
exploring Internet telephony. The interface is clear, quick and
involves a one-click approach with no downloads or installation
programs."
Go2Call
also built information into the monitor interface, so callers can view
a window about the place they are calling and pick up on local
weather, news and sports scores. So far, the competition hasn't done
that.
"There's
a lot of mental bandwidth and visual impact available with a telephone
application" on the Web as users look at their computer screens
during Internet-based calls, said Nix.
The
interface also includes banner ads, which Go2Call expects to represent
about half of its income. Though banner ads generally have been a
flop, Nix contended that the downside mainly has been for "e-tailers"
in very competitive markets.
"We're
in a different space that is growing very rapidly," he said.
Go2Call
plans to earn most of its profits from
premium services, such as Internet call waiting, fax, calls to cell
phones in Europe where calling parties pay, voice messaging and
licensing.
The
company also sells products at its site, such as microphones and
headsets. It offers FoneNet Connect, a $60 device Nix invented to
enable old-fashioned phones to make Internet calls.
Nix
and Spear expect within the next few weeks to complete a second round
of funding with $15 million to $30 million from venture capitalists
and strategic partners.
Later
this year, they plan to move their company, which has 22 employees, to
Chicago to take advantage of the high-speed fiberoptic network
downtown. Spear, a New York native, said Chicago is an attractive
place for the company because the area has many skilled workers with
telecommunications experience.
"The
high-tech community is growing here. And we are the only Internet
telephone company in the area," he said.
Companies
like Go2Call, MediaRing, Net2Phone, Dialpad and Deltathree have
attracted the attention of traditional phone companies. AT&T has
even invested in Net2Phone.
Dillon
said he expects traditional phone companies to be pressured to
continue reducing rates.
Go2Call
has 25,000 registered users already and is growing at a rate of 500 to
700 a day. The pace is expected to pick up when domestic calling is
available. U.S. computer owners can use the company's online dialing
service for toll-free calls to European countries where the service is
available through the site at www.go2call.com.
The
Web site also has a CallFinder service listing the least expensive way
of calling any country in the world.
"Go2Call
has got the opportunity, if things end up hitting right, as being a
very big company since communication and calling is such a fundamental
need," Koulogeorge said. "The telephone market is so large
that if only 5 percent or 10 percent of people make calls this way, it
will be a huge market."
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