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Net2Phone rings in with Netscape deal

The Netscape partnership brings Net telephony to the mainstream, but analysts question whether the masses are ready for it.

Net2Phone's partnership with Netscape brings Internet telephony to the mainstream, but analysts question whether the masses are ready to use their computers to make phone calls over the Net.

Netscape today said it will bundle Net2Phone's Net2Speak Internet telephony software as part of its next-generation Communicator Web browser. Netscape will also include the service as part of its NetCenter portal site.

"IP telephony still has limited exposure and has been relegated to computer hackers. This deal moves it up to a bigger universe of potential customers," said analyst Ken Landoline, of Giga Information Group.

Analyst Tom Jenkins, of consulting firm TeleChoice, said today's deal could possibly make Net2Speak a de facto standard for the nascent technology.

"If 45 percent of the market uses Netscape, everyone uses you," he said, referring to the Net2Speak icon that will be a fixture on Communicator's personal toolbar. "It's an unbelievable win for Net2Speak."

Internet telephony technology has made leaps and bounds, but the market is still maturing. Analysts believe demand will explode in the coming years as companies improve the quality of Net calls and offer unique features, such as videoconferencing and unified messaging, to allow retrieval of faxes, phone calls, and email from a single point.

Avoiding hang-ups
But while analysts believe the deal will boost the number of Net2Phone users, the question is, by how much?

TeleChoice's Jenkins said Net2Phone, a unit of telecommunications company IDT Corporation, should have offered the service for free, since consumers won't want to pay to make calls that don't have the same quality as a regular phone call.

"They will get new users, but will it be a flood of new users? Probably not," he said.

Net2Phone plans to charge 4.9 cents a minute for domestic calls and between 18 cents to 20 cents a minute for international calls. To make a call, users will need to speak into the microphone on their personal computer.

Analysts also say consumers probably won't like the hassle of placing Net calls.

"It's neat, but if a user has to learn a new interface, it won't be adopted as quickly," said analyst Brian Strachman, of Cahners In-Stat.

Landoline agreed. "My computer came with a microphone and speakers, but I don't have my microphone plugged in, so I'm not going to be able to dial up mom in New Jersey," he said. "If I haven't plugged the microphone plugged in, I suspect half the universe doesn't have theirs plugged in either."

As part of its business strategy, Net2Phone has made a big push to get its software to mainstream audiences. Over the past year, the company has struck deals with Yahoo, Excite, and others.

Jonathan Reich, Net2Phone's executive vice president of business development, expects the Netscape deal to boost the company's business, which claims some 1.5 million customers.

"One of the challenges we've faced in the past is having people download the software. This [Netscape deal] removes that barrier," he said.

For its part, Netscape executives said they struck the deal to round out the company's telecommunications offerings, which include instant messaging services from America Online. Netscape's competitor--Microsoft--has yet to strike a similar deal with an IP telephony company, a Microsoft spokeswoman said.

Microsoft does offer NetMeeting, free software that allows two Internet users to call each other for free. But for NetMeeting calls to work, the two parties have to use the same software. Net2Phone, in contrast, allows Web surfers to call people who are using regular phones.