Despite all the hype about computers, the telephone is still the most pervasive technology in business and the cost of using it is significant.

Recent advances in networking mean companies can now significantly cut these costs by using their existing computer networks to carry telephone calls, replacing conventional public telephony and leased lines.

The technology, known as packet voice or voice-over data, is predicted to lead to a multi-billion dollar industry by 2000.

The savings arise because voice signals in data packets require less than one-sixth of the bandwidth of a traditional telephone line, because data can be compressed and need not be sent during the natural gaps in conversation.

The technology is already reported to be cutting call costs of US corporations by up to two-thirds. Cisco Systems, based in San Jose, which manufactures more than 80 per cent of the Internet backbone routers, is pushing the new technology with a range of products.

According to Mr Maren Bennette, sales manager for Cisco in Ireland, there are four areas where voice-over data can be applied. The first is for Internet telephony, where PC users can use the Internet to talk to other PC users.

This is expected to be a reasonably popular, but Mr Bennette does not believe it will have many business users.

The second area is business class voice over Internet (VoIP), offering higher quality and extra services. This market is expected to be worth $1 billion a year in equipment by 2000, Mr Bennette says. The service provider industry will probably be worth even more than this, he says.

He expects Telecom Eireann, ESAT, and PostGem, and their respective Internet service providers, to race to capture the business customers in this market.

While the above technologies will provide for speeds of up to 128 Kbits per second, the bigger corporations, banks and government departments are expected to use a third, faster technology called voice-over frame relay (VoFR).

This allows for video as well as voice to be sent over corporate networks, with a guaranteed high quality service. Beyond this again is voice-over ATM - a high-end communications protocol.

Mr Bennette says both Telecom and ESAT are getting involved in public ATM, but that it is not yet available in Ireland. He says BT and WorldCom are also installing international ATM nodes here.

However, since local telephone calls will still be regulated here for another two years, there may be complications. Cisco's own documentation advises any business planning to use packet-voice networks to "assure itself that it is operating in conformance to all laws and regulations in all the areas the network serves".

The document summarises that it is safe to use packet-voice technology wherever traditional leased lines or PBX (private exchange) to PBX networking can be legally used. More care will be required when connecting to public calls.

The EU has so far resisted regulating Internet telephony, saying: "Voice on the Internet cannot be considered voice telephony . . . and therefore falls within the liberalised area". Mr Bennette doubts regulations will be applied to the new technology.

One of the major limitations of packet voice is the quality of resultant calls. The overall quality of a call is only as good as the lowest quality link in the chain. Thus calls over the Internet, which has no in-built guarantees of quality, may involve annoying delays or gaps in conversation.

This makes it more likely that companies will first use the technology for internal networks based on Internet protocols so-called intranets.

In the longer term, however, improved Internet standards and bandwidth under the Internet II project will provide methods of guaranteeing end-to-end quality over the public Internet, leading to even wider convergence of the voice and data.