Yahoo debuts Net phone service

Yahoo (YHOO) today launched a service that effectively turns its online telephone book into a Net telephone.

Part of Yahoo's People Search section, the new service is the product of a two-year deal with IDT, whose Net2Phone software will let People Search users click on a hyperlinked phone number to automatically place domestic and international phone calls through the Internet.

"This is another step in Yahoo's strategy of moving from just finding information to communicating with other people," said People Search producer David Conway. Citing other Yahoo ventures including Yahoo Mail, Yahoo Pager, and Yahoo Chat, Conway added, "This is another way for us to extend a Yahoo property into the actual communications space."

Yahoo and IDT will share revenue from per-minute charges on phone calls placed through People Search for the duration of the two-year deal. IDT will be the exclusive telephony provider for Yahoo for that time, though IDT is free to pursue similar deals with other portals, search engines, and similar sites.

"Since Yahoo is the most trafficked site on the Web, we expect this deal to do wonders for our brand recognition and to increase our customer base tremendously," said IDT spokesperson Sarah Hofstetter. Net2Phone currently has 350,000 users, according to Hofstetter.

Rates for Net2Phone calls depend on where the call leaves the Internet through a gateway and joins the regular phone network. In other words, charges are determined based on where the call is going, not where it originates.

Starting tomorrow, calls from anywhere in the world to the United States, including calls made from within the United States, will cost 10 cents per minute, with the exception of eight cities where IDT has its own gateway. Calls to those cities--New York, Chicago, Boston, Los Angeles, San Francisco, San Jose, Miami, and Washington--will cost 8 cents per minute.

Most calls made to destinations outside the United States will cost between 13 and 65 cents per minute. The rate schedule will be announced tomorrow. A small percentage of calls will cost more than 1 dollar.

For Yahoo's People Search users, the combined service will let them find a number through Yahoo's "white pages" directory, then click on that number to place the call. Users must set up an account with IDT and prepay in increments of $25.

Internet telephony recently has made significant strides--including earning the embrace of Wall Street--toward its goal of widespread public acceptance and use. But some concerns remain over the quality of sound in a technology originally designed to move data, not voice.

IDT's Hofstetter downplayed those concerns.

"With a headset or Internet phone jack, it sounds just like a regular telephone call," she said.

"With a microphone and speaker on your computer there is some echo," she conceded, but noted that the service comes with a money-back guarantee.

IDT is not related to the semiconductor company of the same name.