The Internet may not be everyone's cup of tea, but those who use it have long enjoyed the benefits of a fast and cheap messaging service. Those who haven't may soon benefit too, as their phone calls could soon be routed over the Net, bringing cheaper long-distance calls and a wider range of services. At the same time, telephone companies' new business models are predicted to lead to yet more "globalisation", with increased alliances, mergers and acquisitions.

The European Telecommunications Standards Institute (ETSI) is well advanced in a project called TIPHON, devising standards for linking the Internet to existing telephone networks. Mr Barry Castle, European public affairs manager at 3Com, is vice-chairman of the project (pronounced "typhoon"). He insists TIPHON is more than just hot air from a standards body. He predicts telephony over the Internet protocol (IP) will change the global telecommunications industry.

TIPHON is an acronym for Telecom and Internet Protocol Harmonisation over Networks, and according to Mr Castle his meetings are a "live" coming together of the worlds of telecommunications and datacommunications.

There are more than 20 ETSI member companies and telephone companies (telcos) in the project, including networking giant, Cisco, 3Com, Microsoft, Intel, Ericsson, Lucent and Siemens, as well as Deutsche Telekom and Telecom Eireann's partners Telia and KPN.

Are the carriers not sceptical of something which bypasses their long-distance trunks? Some carriers are more enthusiastic than others, Mr Castle says. For example Post and Telekom Austria is one of the most keen, while "Deutsche Telekom have now been operating an IP telephony trial for six months".

He says that although AT&T and British Telecom are big players in the Japanese IP telephony market, BT is not seen as one of the more enthusiastic voice over Internet supporters in Europe.

"Carriers are all, at the moment, revamping their business models to take account of the new converged marketplace," he says, citing the giant US carrier AT&T as an example: "It's significant that we now see companies like AT&T announcing . . . a restructuring . . . Part of the services they will now move towards are IP-based services, with particular emphasis on voice over IP."

Mr Castle says the existing carriers are well placed since they already have high bandwidth links across the globe, but more global alliances are likely. "This new business model of taking an IP terminal for voice, and using it to reach global points of presence, using whatever network one has, really lends itself to having global alliances," he says.

So we can expect more alliances then, despite being told deregulation would lead to increased competition? Definitely, says Mr Castle. Over time, he says, Internet telephony "can only result in a lot of alliance and/or acquisition activity". He agrees that mergers are, on the surface, anti-competitive, but expects mergers to result in a "handful of pan-European service offerings, and another handful of global service offerings". He believes this will give the customer more competition and more choice.

Describing IP telephony as a "motivator for competition", he predicts "an awful lot of action in this marketplace". He cites joint developments by 3Com and Siemens as an example, combining 3Com's networking experience with Siemens's carrier experience.

So, who will be the first to use it? Mr Castle predicts one of the first popular uses of Internet telephony will be fax. With some corporations' annual fax bills in excess of $1 million (£714,285), they would readily listen to a carrier offering significant cost savings using fax over IP. He stresses the carrier would need points of presence in every major city in the world, but not necessarily using its own network: global coverage will be achieved through alliances.

While Internet telephony is already available from PC to PC and from PC to telephones, IP-based telephones and fax machines will soon be available too. Siemens, for example, has said it will launch dedicated IP telephones next May.

But the business models are not limited to cost savings on long-distance calls. Mr Castle cites the following possibilities:

Call centres can be made much more efficient. A Web page could contain a link which, if clicked, gives the user a voice link to the relevant sales person for that product. With these services, it can't be too long before companies are selling insurance over the Web.

Customer support can be integrated with email.

Using IP telephony, conversations can be stored and later searched for keywords. This may have numerous benefits, but also has major implications for privacy as it makes it the job of eavesdropping significantly easier.

Location independent working (LIW) becomes easier. As soon as you switch on your laptop or IP phone, all messages and further calls could be automatically routed to it instead of to your office or home phone.

Multicasting of voice over the Internet will have applications for business conferences, virtual classrooms, and of course Internet radio, which already exists but is of poor quality.

One of the possible pitfalls of Internet telephony is that the choice will be confusing. Deregulation in Britain has already led to quite complicated bills, and the merging of telephone calls (usually billed by time) and datacommunications (usually billed by amount of data and quality of service) may make matters worse.

Here, he says, TIPHON can learn from GSM, where customers get a single bill even if they have roamed through many carriers' networks. Each telco negotiates one-to-one over billing issues, and this, he feels, will also be the case with Internet voice applications, where systems will work out the cheapest route over which to send a call. Where agreements on single billing do not exist, he predicts, brokering companies are likely to be set up to provide "one-stop shops" for billing. Eoin Licken is at eoinl@iol.ie