How to Budget Your Home Phone Service

Internet Phone Service

So you'd like to keep a home phone, but you don't want to pay the fees, taxes and add-on charges associated with a plain old landline? You're in luck, because a new technology called Voice over Internet Protocol (VoIP) has emerged as a challenger to the traditional home phone. Instead of utilizing a network of copper wires, like traditional landline phones, VoIP services convert your voice into a digital signal that's delivered using the Internet. If you want to call a landline phone from a VoIP service, the signal is converted to analog. Some VoIP phones plug directly into the broadband connection, similar to a traditional phone jack, while others connect to your computer [source: FCC].

VoIP service is cheaper than the old-fashioned landline, and the voice quality is typically high, but there's a catch: You must already have broadband Internet service in order for it to work, which can be a deal-breaker for many. Some VoIP services require you to be at your computer whenever you make a call, while others enable you to connect with traditional phones using an adapter. One of the most popular VoIP services is MagicJack, which is a small adapter that enables you to plug a phone into the USB drive of a computer. For $20 per year, MagicJack offers unlimited nationwide calling [source: Rist].

There are several advantages and disadvantages to VoIP services. The technology Web site CNET recently ran a head-to-head comparison of existing VoIP services versus plain old telephone service, and the result was a draw because the two technologies have different strengths and weaknesses. VoIP still lags behind analog phones in a few critical areas, including reliability and emergency calls. During a power outage, landline phones often continue to work because they're powered using their own dedicated copper wires. However, VoIP service performs just as well as landline phones in voice quality, and it outperformed traditional phones in perhaps the most important category of all: price [source: Elliott].

Most basic VoIP plans include unlimited calls, and they're generally much cheaper than the standard fees for a home phone, but the area that they really surpass traditional phone companies is in long-distance and international calls. So if you're a big talker and have cross-country or overseas friends or family, VoIP might be the way to go.