ICG promises callers savings with long-distance network

Residents and small businesses in Columbus and 30 other cities are now able to make domestic long-distance voice calls for as little as 5.9 cents a minute on a data network supplied by ICG Communications Inc.

ICG Netcom's IP Long Distance is a marriage between ICG's circuit-switched network, and a fiber-optic, packet-switched network deployed by Netcom On-Line Communications Services Inc., which ICG acquired in January, said David Gandini, president of long-distance operations for the Englewood, Colo.-based company.

Circuit switching, developed with the birth of the phone industry 100 years ago, opens a line between two points for voice calls. Nowadays, it is considered a reliable, but inefficient way to use a network. Packet switching, developed for transferring data, uses Internet protocol technology to break up information into bits and send them on their way over several channels to be reassembled at their destination.

Internet protocol technology attempts to merge the efficiencies of packet switching to common voice calls. Until recently, calls over the Internet suffered from poor quality or delays. By using its network and working with vendor Cisco Systems Inc. to improve routers, ICG thinks it has solved those problems, Gandini said.

"We think our quality today on the Net is better than cellular (phone) quality, and look at the number of users on that network," he said.

The routers already have been installed in Columbus, Dayton, Akron and Cleveland, said John Humphries, vice president, operations, for the Ohio Valley. Other Ohio cities are expected to follow by December.

The efforts by ICG and other competitors to install packet-switched voice networks are threatening the Baby Bells because they continue to rely on circuit-switched networks, said Judith Oppenheimer, president of industry analyst ICB Toll-Free Consultancy in New York.

"I think the carriers and the big phone companies are in big trouble," she said.

The lower prices will be very attractive to customers. And although AT&T advertises 10 cents a minute, it's not universally available.

"Plenty of customers are still spending 25 to 30 cents a minute on phone calls," she said.

Calls placed entirely over ICG's so-called backbone will cost 5.9 cents a minute, and calls that begin or terminate on another company's network will cost 8.9 cents per minute. Gandini said the company expects to have the service available to 166 cities by year-end. The service won't be available for international calls until 1999, and then at a rate that must be negotiated with an international carrier, he added.

The service is available only to residential and small-business users at first, because it identifies users by one telephone number and it must be paid by credit card, Gandini said.

Larger companies with PBX equipment can cause problems with the identification and billing software. "Next year, we'll bundle the (IP Long Distance) product with our other services, so we can offer to them then," he said.

Customers would access the service by dialing a seven- to 10-digit number, then would dial the area code and number. While that means customers would routinely dial 17 to 20 digits for a long-distance call, analyst Oppenheimer thinks that wouldn't bother customers.

"If I can get phone service at 50 percent less than it costs me now, I don't see (dialing 20 digits) as a huge deal," she said.

The service can only be used for outgoing calls because router technology is limited, Gandini said.