New wave of online chat firms thinks out loud

A few hours before Hurricane Floyd hit the northern New Jersey town of Saddle Brook last year, local police logged online to warn community members of the danger.

But instead of sending email messages to the community, officials were able to talk directly to people caught in the storm. Technology from voice chat company Firetalk allowed police to answer frightened residents' questions directly without tying up the local switchboard, according to Saddle Brook police Sgt. Glenn Toepert.

Saddle Brook's experience provides a small but telling endorsement for a new generation of Net voice companies now putting a new twist on online conversations.

The idea of putting voice on the Net has been around nearly as long as the Internet itself. Established Net telephony companies like Net2Phone and VocalTec based their business on taking ordinary phone calls and putting them online, providing a cheaper alternative to long-distance services from the likes of AT&T or MCI WorldCom.

Today?s companies are instead

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modeling their features on hugely popular Web-based instant messaging programs and chat rooms, taking advantage of a broader range of Net technologies. The new services allow users to create "buddy lists" to keep track of who is online, as well as provide conference calling and instant text messaging.

Some of the start-ups are looking to displace local phone firms altogether. While a bold strategy, some analysts say the best of these voice chat companies have finally hit on a mix of services that could attract some voice business away from the entrenched telephone companies.

"We're talking about building an Internet-bred telephone company," says Mark Winther, worldwide telecommunications analyst for International Data Corp. "This is a transformation. It's not just putting the telephone online."

Yet the new firms have a significant number of hurdles to overcome before their services are accepted in the mainstream. As with traditional Net telephony, not many users are comfortable using their PC as a telephone. And users may be daunted by new hardware requirements to get systems up and running.

"You have to deal with the technology issue, which is not perfected. Then you have to alter users' behavior," Forrester Research analyst Amanda McCarthy says. "Those are two big hurdles."

The new chat services are based on Internet telephony technology, which is still struggling to shake its reputation as a PC hobbyist's niche market.

About 2.5 billion minutes of calls were routed over the Net in 1999, according to analysts--strong growth from the year before, but far short of the 7 trillion minutes people spent chatting over regular phone networks.

Yet as traditional Net telephony slowly moves toward a more mainstream audience, voice chat companies are now entering the spotlight. In the last few months, Firetalk, Lipstream, HearMe and other rivals have attracted tens of millions of dollars in venture funding and signed up hundreds of thousands of active users.

At the most basic level, these new companies allow visitors to talk to each other over an Internet network. For example, an e-commerce customer could talk to a customer service representative while making a purchase, companies say.

Yet firms such as Lipstream and AudioTalk say they don?t want to be just another pipeline for idle chatter.

"The model is not ?Let's recreate the telephone,'" AudioTalk director of business development Tim Riley said. "If people want private conversations, let them go to the telephone and do that for 5 cents a minute."

Firms that deal directly with consumers say they're seeing increasing interest in talking online in ways that go beyond relatively minor applications. Individuals want to chat with friends, with other Web page visitors or with multiplayer gaming rivals, they say.

"We know that people really enjoy chatting on the Web," HearMe executive vice president Jeremy Verba said. "We see voice becoming part of the basic infrastructure of the Web."

Firetalk is the most ambitious of the new companies. Its executives see its tight integration of ordinary voice conversations, Web surfing and voice mail as a vast improvement over--and even a replacement for--ordinary telephones.

Company chief Bruno Tapolsky talks glowingly of speaking online to friends in several different countries simultaneously, and says his service is close to allowing online users to "call" ordinary phones as well.

"We believe we are building the next generation communications system, and even in a way, the next generation phone system," Tapolsky says.

CNET Networks, the publisher of News.com, is an investor in Firetalk.

But for all the optimism, companies will face considerable social and technological obstacles before reaching even the popularity of text-based instant messaging--much less the ordinary telephone.

Most computer users don't think of their PC as a telephone, analysts say. If Net surfers want to communicate, they'll type--or simply pick up a telephone.

And while many computers come with the basic hardware necessary to hold a voice conversation online, the usual microphone and speaker system provided is a poor substitute for the reliability of a telephone handset. Even if a user has a microphone, speakers and sound card technology, putting the pieces together isn't always easy.

Finally, the voice quality of the services themselves can vary widely, sounding at best like a high-quality cellular phone connection. Busy networks, a badly configured microphone or other factors can garble conversations.

Despite these hurdles, the systems are beginning to catch on. HearMe says it's handling more than 340 million minutes of voice traffic a month, and says its voice software has been downloaded more than 1.4 million times. Firetalk says it logged 17 million minutes in the first month after its late-October launch, and now has more than 400,000 users.

Winther says he expects big things for the industry this year, as computers with microphones and speakers become more commonplace.

"There is some impressive growth out there," he says. "I think it's not unlikely that by the end of 2000, we could be looking at 30 million to 40 million users between all of these different systems."