Web Phone Woes

Lured by the prospect of saving money, callers are signing up for Internet phones in droves. But watch out for snags that are unheard of with landlines.

Tom Spring

Pamela Stodghill of Alabama thought Internet-based telephone service would help lower her household's $65 monthly phone bill. An "unlimited" calling plan from the company 8x8 looked like a great way to stay in touch with distant family and friends.

But despite spending 12 hours on a (landline) phone with 8x8's tech support staff over the course of a month and despite paying $104 in fees, Stodghill never received working phone service, and she lost the family's phone number of three years while trying to transfer it from BellSouth, her landline carrier, to 8x8.

Millions of consumers are tempted by inexpensive Net phone services--some priced as low as $10 a month--and Stodghill isn't the only one to incur huge headaches when things go wrong. She says she gave up on VoIP after spending far too much time dealing with technical problems and installing replacement equipment. "At a certain point you just have to throw in the towel and say, 'Is this really worth it?'" Stodghill says.

The number of people turning to VoIP as a low-cost alternative to traditional phone service has nearly doubled in the past year, and the industry has struggled to keep pace. Among the hundreds of complaints regarding VoIP service that are filed to state public-utility commissions, the most common involve dropped phone calls, poor sound quality, problems with transferring numbers from standard phone companies to VoIP providers, and long wait times for customer service.

Not only did 8x8 keep Stodghill on hold for an inordinate amount of time, she says, but its customer service staff was condescending and rude. In the end, she demanded her old telephone number back and a refund. She was told that her phone number could not be returned, and she is still waiting to receive the refund. So she filed a complaint against 8x8 with the Better Business Bureau (BBB).

With just 113,000 customers nationwide, 8x8 has racked up 112 complaints in the past year with the BBB of Santa Clara, California, where 8x8 is based. In response to those complaints, the BBB rated the company as having an "unsatisfactory business performance record." But other VoIP firms have poor records with the BBB, too. The BBB says it has collected 1088 complaints against Vonage (which operates the largest Net phone service, with 1.6 million customers in the United States and Canada) in the past 12 months. During the same time period, Verizon fielded 1039 complaints filed against its landline service--though it manages 48.8 million phone lines nationwide. Another VoIP provider, BroadVoice, is the eighth-most-complained-about company in eastern Massachusetts, Maine, and Vermont, according to the BBB office serving those areas.

Huw Rees, a spokesperson for 8x8, says that the company is doing its best to reply to BBB complaints. "I think we are doing a good job with customer service," Rees says. "Could we do better? Yes." He says problems such as number portability are out of 8x8's control, and he complains that traditional phone companies control most phone numbers and don't make it easy to transfer them.

"With hypergrowth come hypergrowing pains," says Theresa Mastrangell, VoIP expert with market analysis firm Broadband Trends. She says Internet phone services can't hire customer care representatives fast enough. Meanwhile, she adds, the nascent VoIP industry has yet to straighten out such thorny technical issues as how to provide emergency 911 to all its customers and how to transfer phone numbers between phone companies.

New Jersey's Raymond Bey found out how precarious new technology can be when he signed up for Vonage in 2004. For over a year, he tried to get his service with Vonage to run properly with the right phone number--to no avail. "I had problems with Vonage's phone service that I didn't know you could have with your phone," Bey recalls.

For eight months, outbound calls from his Vonage phone displayed an incorrect telephone number on recipients' caller ID service. When people used the caller ID info to return Bey's call, he says, a recording said the phone was out of service. Other service snafus included voice mail that frequently did not work, faulty equipment, and the loss of his phone number of 30 years when Vonage tried to transfer it from Verizon.

"I've filed complaints with every agency I know," Bey says. He also filed a lawsuit against Vonage in the U.S. District Court for New Jersey seeking over $1 million in punitive damages, alleging negligence and fraud. His case was dismissed, but he's appealing the ruling.

VoIP Technology: Still Young

Some of the VoIP industry's problems stem from the way that it markets the technology, says Amanda Sabia, analyst with Gartner Research. Too often, she says, Internet phone service is touted as a simple alternative to traditional phones, and many consumers don't fully understand the technical issues and trade-offs involved in replacing their landlines with Net phones.

At least one VoIP provider concedes that the technology remains a work in progress. "We like to remind people they are dealing with a technology that is still under ten years old and not as mature as the 100-plus-year-old traditional telephone network," says Gene Cornfield, BroadVoice spokesperson. Cornfield says his company doesn't always advise potential customers to replace their phone lines with VoIP.

One of the biggest technical challenges is the task of providing all customers with reliable access to 911 emergency services. Broadband technology, which VoIP depends on, isn't completely reliable, so access to emergency services via VoIP isn't either--even assuming that you have access in the first place. FCC regulations require VoIP firms to inform customers of the important differences between calling 911 using a Net phone and doing so with a traditional landline phone. For example, power outages, among other occurrences, can render your broadband modem and (as a Result) your phone inoperable.

Some VoIP Firms Don't Offer 911

VoIP provider BroadVoice signs up new customers on its Web site. But one of its support pages says that the company does not offer 911 services.

With traditional 911 emergency calls (aka enhanced 911), a caller's phone number and address appear on the emergency operator's line. This may not happen with 911 services offered by VoIP carriers. In some cases 911 calls made from a VoIP phone are routed to call centers whose operators must ask for the phone number and address so they can forward the call to a local 911 operator. Some VoIP providers don't offer 911 service at all.

In 2005, safety proponents criticized the lack of 911 support in many VoIP accounts as a public safety hazard and attributed a number of deaths to callers' inability to reach 911 services. That prompted the Federal Communications Commission to require VoIP providers to implement 911 services for their customers. In areas where companies weren't routing 911 calls to emergency response centers, Internet phone companies were supposed to discontinue marketing to--and signing up--new customers.

Some VoIP providers still don't offer 911 service but continue to market and sell service in areas that lack it, in seeming defiance of FCC regulations. BroadVoice's Web site says that "At this time, BroadVoice does not provide 911 or E911 services." The company says that it expects to do so sometime in the near future, but in the meantime its Web site continues to accept new customers. When asked to explain why BroadVoice was selling service in what appeared to be violation of the FCC rules, Cornfield declined to comment.

Other companies, including New Jersey-based MyPhoneCompany.com, make E911 an optional service (even though the FCC intends for 911 service to be mandatory on all phones; it does not want customers to be able to opt out of it). MyPhoneCompany did not respond to repeated requests for comment for this report.

For more information on E911 services, see "VoIP Firms Don't Answer FCC's 911 Call."

Watch How Much You Say

Many VoIP providers impose very restrictive terms of service, including low-usage fees--surcharges that apply if you don't incur enough regular charges in a month--huge early termination fees, and mandatory shipping costs for returning faulty equipment. ViaTalk requires that the ratio of calls received to those placed be roughly equal; if you receive 75 percent or more of the calls on your account, or make 75 percent or more of them, you risk being designated as a business account and incurring a steep rate hike.

Jean-Claude DeMars of Texas says that Primus tried to charge him $5 extra one month as a low-usage fee. He angrily canceled his service--but then discovered that he would have to pay the shipping fees to return his Primus equipment or face a $40 disconnect fee.

"I saw the [VoIP] ads and thought this was the answer. Apparently, I've got a lot to learn," DeMars says.

Call Issues: Common VoIP Complaints (chart)

Voice-over-IP telephone service continues to grow in popularity nationwide, and many customers like the service. But a surprising number of people have run into problems with VoIP providers and with the relatively young technology. Here are some of the more common complaints.