Net2Phone mulls deal for free domestic calls

The Internet phone service may consider extending a deal for free domestic long-distance calls as competition heats up in the Net telephony market.

2 min read
Net phone service Net2Phone may consider extending a deal for free domestic long-distance calls as competition heats up in the Internet telephony market.

Net2Phone is offering free long-distance calls within the United States this week as part of a holiday promotion. The Net telephony firm today announced it has partnered with anti-virus software maker McAfee.com to offer 200 minutes of free domestic calls to software users.

The free calls, normally 3.9 cents per minute, are for PC users who are dialing to traditional telephones. International long-distance rates, which start at 15 cents per minute, are not included in the special promotion.

Net2Phone's service allows a computer user to make a phone call over the public Internet. Aided by the company's software, a user can make a call and talk into a microphone installed in most computers.

Net telephony is still an emerging market that is unknown to many mainstream Net users. Yet the market is expected to skyrocket as consumers here and abroad realize that Web phone calls are often less expensive than regular toll calls, analysts say.

Net2Phone has long been the leader in the nascent Net telephony market, and has watched its share price soar as it has inked deals with some of the leading firms in the Internet market. Earlier this month it signed a deal with America Online to create an AOL Instant Messenger (AIM) Net-based telephony service.

Yet competition is heating up, possibly pushing Net2Phone to consider offering free domestic calls permanently.

San Jose, Calif.-based start-up Dialpad.com is offering free domestic PC-to-phone calls, relying on advertising as its sole revenue source. Dialpad.com claims to have registered 1 million users since launching in October.

Another firm--ZeroPlus.com, owned by E-Net--is also offering free domestic calls this week as part of a holiday promotion.

To compete with Dialpad.com, Net2Phone is considering a similar advertising-based service that offers free domestic long-distance calls, Net2Phone spokeswoman Sarah Hofstetter said.

The company expects to perform trials of an ad-based service within six months, but has yet to decide whether to offer the free service nationally or only to select areas or customers, she said.

Most of Net2Phone's revenue and profit comes from international phone calls, so offering free domestic calls shouldn't hurt the company's bottom line, Hofstetter said.

"We're not too concerned about Dialpad. Very few of our revenue is United States-to-United States traffic," she said.

Dialpad executives could not be reached for comment.

Net2Phone offers two other services for phone calls over the Internet. Users can make PC-to-PC calls over the Internet, or make calls from a regular phone to another phone using a Net2Phone calling card. These calls are routed through Net2Phone's private Internet-based network.