Although long distance call charges continue to fall, Internet users in the Republic and the rest of Europe may soon be able to conduct such calls via their desktop, virtually free.

The ability to make a long distance phone call through a personal computer could revolutionise the fixed-line telecommunications market.

Microsoft recently released a new version of its MSN Messenger 3.0 which enables users in the United States and Canada conduct PC-to-PC voice conversations over the Internet.

The calls do not cost extra because the customer is paying for the connection already.

Although people in Europe can only call the US or Canada via the service, a spokeswoman said the company did have plans to extend the service to other routes.

Mr David Ryan, chief executive of Spirit Telecom said voice over Internet protocol (VOIP) represented a passport to free voice services.

He said that margins in the voice market were falling dramatically and that in future, value added services would be where telecommunications companies would generate their revenues.

Mr Ryan believes that, with the unbundling of the last mile, packages will be offered which will include free voice calls to certain countries from the Republic, as well as a myriad of other services including Internet and cable TV.

Quality issues have often dogged Internet telephony but Mr Ryan said that on private IP networks high-quality voice services would not be a problem.

Spirit telecom is building an i21 network throughout Europe and already have VOIP available in Spain and Portugal.

The company expects with an increase in bandwidth, at cheaper prices, calls to Europe will fall to the equivalent cost of a national call.

Recent research by Probe indicates that 16 per cent of computer users have the ability to move to Internet telephony in the next three years.

Mr Jan Thompson, a telecommunications consultant with Mason communications said that some companies argue that VOIP is going to take over but he said the technology still needs to evolve.

He said that he did not believe that it will replace existing networks because of reliability issues and the advancement of existing technologies.

Mr Thompson said people will use, what he believes is the lower quality of Internet telephony, for certain calls to take advantage of lower costs. He said it will be a trade off of quality versus cost.

A recent survey in the US predicted forecast that telecoms firms could lose $8 billion (€8.9 billion) over the next four years as using the Internet for voice and fax phone calls increases.

The study's authors, Action Information Services, said Internet telephony introduces a new paradigm for businesses.

Where traditionally data traffic piggy backed on the voice networks, the company said we are now seeing the flip side of the coin.

Data product manager at Esat Telecom, Mr Peter Evans said that the company was enthusiastic about VOIP's potential and was conducting technical trials.

He said the benefits will be seen, not just in voice, but in bundled Web applications with, for example, consumers on a website being able to click and talk to a customer service representative online.

Mr Evans said VOIP will result in convergence of networks whereby companies will have one network to manage rather than the existing voice and data backbones, which will reduce costs.

He believes that VOIP networks will eventually almost completely replace traditional circuit switched telephony with traditional phone lines available only in peripheral areas.

Internet telephony charges, which will be calculated per byte of data, will represent the main revenues of VOIP operators.

Estimates differ as to the impact on the pockets of traditional phone companies with Forrester Research predicting that by 2004 the loss will be $3 billion a year.

Within this figure is a $1 billion per annum saving for consumers.

Another development that will fuel the progress of the Internet as a vehicle for voice communications is the creation of gateways which allow people to make calls from traditional phone lines connected to the Internet.

Call charges for these services are 40 per cent lower than traditional phone calls in the US.

The benefits of Internet telephony will be mainly felt by those making long distance rather than national or local calls.

Some traditional telephone companies such as Deutsche Telekom and France Telecom are investing in the possible development of such services in Europe. However, dominant carriers are slow to move in the area because it will mean a total change from the circuit switched infrastructure, in which they have invested billions.

A study conducted by Jupiter Communications published in February was sceptical about the potential of online voice communications with audio spots being the main problem.

The report said that vagaries in network performance resulting from latency and dropped packets will further result in inconsistent delivery and low quality audio.

However, it said that if VOIP does become widespread it would come in form of an ad-supported long distance service with a HTML pop up window that will support the delivery of targeted advertising without disrupting the flow of a conversation.

The study said that many of the benefits of text chat via the Internet, including its ability to handle four customer service queries simultaneously, and the ease of storing and forwarding a service interaction, will be lost with voice interaction.

Eircom is conducting a nine-month trial of voice over VOIP, but a company spokeswoman said that the company would have to be satisfied on quality issues - the performance of VOIP or Internet telephony has been sketchy in the past.

Eircom is using Net2phone technology to take a portion of voice traffic that's destined for the US, convert the voice to packets and route these to a Net2Phone gateway near the call's destination. The call is then reassembled for normal termination on the phone network.

The company said it believes that it could bring real benefits to corporate consumers who have a large amount of international call traffic.

It added that it had had no problems with the quality of the service.

Telephone calls are estimated to represent a significant portion of companies' network budgets as much as 33 per cent in some cases, so VOIP may present an attractive way for companies to cut costs.

The magnitude of the impact that VOIP will have is not certain, but one thing is crystal clear, call prices are going to plummet.

rorykelleher@ireland.com