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Cisco dials up new business in Net phones

Cisco Systems and Dialpad Communications separately announce new devices that let people make calls over the Internet using their regular phones.

Cisco Systems and Dialpad Communications on Monday separately announced new devices that let people make calls over the Internet using a regular phone.

The technology allows consumers with high-speed Internet access to make Net-based phone calls--a potentially cheaper alternative to making calls through traditional phone carriers, such as AT&T, Sprint or SBC Communications.

To make Net-based calls, a user can simply plug a telephone into the device, then connect the device to their cable or DSL (digital subscriber line) modems.

The new products will allow Internet service providers (ISPs) to offer Net-based phone services to their customers. Cisco's new product is available now, while Dialpad's product will ship this summer.

The two companies join Net2Phone and other competitors in the race to offer Net-based phone services. Net2Phone recently released a similar product with network equipment maker Linksys.

DSL and cable operators are looking to generate more revenue by bundling phone services with high-speed Internet access. And analysts say there is growth potential: according to various studies, only about 5 percent of people surfing the Internet do so over a broadband connection. Jupiter Media Metrix expects the number of DSL subscribers to increase from last year's 1.2 million to 11.8 million by 2005.

For Cisco, its new product allows the company to get deeper into the emerging market for Internet telephony equipment, where it competes with the likes of Lucent Technologies and Clarent. For Dialpad and competitors Net2Phone, and others, the new products allow them to better compete against long-distance companies that are constantly lowering prices. But the need to find new customers and new ways to push interest in the fledgling Internet telephony market is ever-present.

Larry Hettick, a vice president for consulting firm TeleChoice, said the new devices could present a competitive challenge to traditional Bell companies, which often profit by installing second and third phone lines in homes.

"People will look at it as a way to get a second line for their teens or fax machines," Hettick said. "That takes money away from the (traditional Bell companies)."

Cisco has cut a deal with Voicenet Communications, which allows customers using Cisco hardware to call each other for free. In general, Voicenet charges 3.5 cents for customers who call people not within Voicenet's network.

Dialpad executives said the company has signed a deal with Level 3 Communications, which will offer Dialpad's Net-telephony services and products to its ISP customers. Dialpad executives say pricing options include a monthly subscription fee that allows for unlimited phone calls.

Cisco and Dialpad's devices also offer voice mail and call forwarding, which allows people to forward their phone calls to other numbers, for example a cell phone.