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YOU CAN'T HEAR A PIN DROP, BUT ``HEY, IT'S FREE!''

New York, NY April 4, 2000 (ICB TOLL FREE NEWS) When Elaine Pitrie wants to make a long-distance call, she doesn't have to check the clock or wonder which of those ``10-10'' numbers is the best bargain.

The Boston Herald reports that Pitrie, an office manager from Chalmette, La., has discovered something even more appealing than discounted evening rates and bare-bones long-distance companies: an Internet service that she can use to make unlimited long-distance calls. For free.

``It was just unbelievable to me that you can do this,'' said Pitrie, who last month signed up for Dialpad, one of a new breed of voice-over-the-Internet services that industry experts say have traditional telecommunications companies watching their backs.

``The first call I placed was a local call to my brother, who was the first person who told me about it. Then I called some people in Idaho and Baton Rouge.''

And although she can't hear a pin drop during an Internet call, ``Hey, it's free,'' Pitrie said.

``I keep thinking we're going to have to pay at some point, but I'm going to take advantage of it while I can.''

Actually, what Pitrie was witnessing, analysts say, is the beginning of the end for long distance as the term has been understood for decades. With the ability to broadcast voices over the Internet for free, long-distance companies already see the handwriting on the wall.

``The long-distance business as we know it won't exist in a few years,'' said Jeffrey Kagan, an Atlanta-based telecommunications analyst.

``Changes and threats are coming from a variety of angles, including new competitors like the Baby Bells, cable television, other service providers and voice over the Internet. Soon there will be so many ways to make long-distance calls it will make your head spin.''

Kagan and others say telecommunications companies will simply join the trend of free or almost free long distance by folding it into a bundle of telecommunications and interactive services. Instead of paying for each separately, consumers will purchase bundles of the services they want, with long-distance calls as lagniappe.

``Long distance will eventually go to nothing because companies will be giving it away in order to get business for their bundles of services, including broadband Internet access, interactive TV and video conferencing,'' said Robert Rosenberg, president of Insight Research Group, a telecommunications market research firm in Parsippany, N.J.

``For the long-distance companies, 80 percent of their business is voice and 20 percent is data. That's about to inverse, whether it's next year or 18 months from now, and anyone caught flat-footed is going to be out of business.''

Until recently, the only way to use a computer to place a call to someone over the Internet was to make a computer-to-computer call requiring both parties to have an Internet connection, microphone and speakers or a headset and Internet telephony software, such as Microsoft's Netmeeting. The calls also had to be pre-arranged, since the software couldn't make another computer ``ring.'' Voice chat Web sites such as Hearme.com enabled computer users to have online conversations with real voices, provided both parties were registered members of a site and agreed to meet there at the same time.

Now companies such as Dialpad, MyFreeLD and Callrewards are offering free long-distance calls that are routed over the Internet and ring on the recipient's telephone. To use these services, all someone needs is a PC running the Windows operating system, a sound card, a microphone and computer speakers, an Internet connection and a willingness to register by answering demographic questions and to view advertising during calls.

Other Internet telephony companies are selling long-distance for pennies a minute for calls within the United States, and for pocket change to the rest of the world.

Since its launch in late October, Dialpad has signed up more than 4 million people, and that was with hardly any marketing budget, said Peter Hewitt, the company's vice president for communications.

``We're adding a new member every second. It is a total kind of word of mouth thing. What does someone do when they get the service? They call five people, and those five people call five people,'' Hewitt said.

The company makes money with banner ads displayed on its pop-up dial screen. The company also wants to license Dialpad to other Web sites, so that visitors to those sites can click on a phone number and place a call using Dialpad, Hewitt said.

Because calls placed using Dialpad and other services are routed over the Internet, the quality of the call depends on traffic and connection speeds. Calls placed in the evening with a dial-up modem will have more delays and dropped words than one placed in the early morning with a digital subscriber line or cable modem.

Reliability can also be a problem. Calls can be disconnected with no warning and servers can be down for hours or days.

That's why some observers say Internet technology isn't posing much of a threat to long-distance phone giants - at least not yet. ``This is a threat, but not in its present form,'' Kagan said. ``As it matures, it will be attractive to more customers. Today it's still pretty much a novelty. Customer service can be nonexistent and the quality horrible.

``But it's just in its infancy.''

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