Should You Skype?

As long you have an Internet connection, the sky's the limit for this convenient, inexpensive calling technology.
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It took a tech-savvy engineer friend to get me to start using Internet-based phone service, also known as voice-over-Internet protocol (VOIP), on a regular basis.

I had tested several services on my own already, but when I followed his recommendations, I set out to do a price comparison and all the other comparisons you'd expect.

Then I started making calls to Costa Rica. I even went to Italy and found that I could be doing business with the U.S. for just over 2 cents a minute.

That's when I knew I really had found the good life: I could eat fresh pasta with my Italian

amici

while keeping my business humming along.

Sure, you have to have an Internet connection -- that's the one big requirement here. But on the plus side, you get portability: Go to Romania, and as long as you can get online, you're good to go. But with a cell phone, if you go to Romania, chances are your cell phone won't be working unless you've coordinated with your phone company in advance.

Wouldn't it be nice to have a phone plan that was simple to understand, promised no surprises and, as a bonus, offered the best rates available anywhere? As in ... free?

In my most recent tech

article, I talked about carefully evaluating what you really need in terms of new personal technology.

All too often we buy stuff that looks really cool but turns out to be more trouble than it's worth. Or it simply doesn't do that much, and you end up wondering why you laid out the money in the first place.

But here's one that's worth a try: Skype. Owned by

eBay

(EBAY) - Get Report

, Skype is one of the new VOIP services that allows you to call someone just as you would on a regular phone. But instead of using the expensive private infrastructure of a cell provider, you use the cheap and public Internet.

What does that mean? You can call other Skype users for free. No charge. Nada. From anywhere on the planet. And for those not on Skype, it's still very, very cheap.

Click here for the video version of this story from Jennifer Openshaw.

It works like this: You download the free Skype client software onto your PC, Mac or Linux-based computer and create an account. If you already have a headset or microphone and speakers attached to your computer, you're done.

The benefits:

  • Regular domestic and international calls.Calls to Skype users are free, and there are 7 million of them. Calls to non-Skype users average about 2 cents a minute to anywhere in North America and most of western Europe. You can also purchase a calling plan allowing unlimited calls to non-Skype users in the U.S. and Canada for $30 a year. The closest competitor, Vonage (VG) - Get Report, offers similar free or low-cost VOIP service, but it has monthly and initial setup charges. Think of Skype is the "pay as you go" version.
  • International calls while traveling.Here's a Skype killer app. You're traveling in Europe and you need to check in with the home office and family for a few hours each night. A typical business cell plan might charge 67 cents a minute -- that's several hundred dollars over the course of a two-week trip. With Skype, the cost would be zero to other Skype users, or 2 cents a minute otherwise. Even Vonage costs $30 a month with a required 12-month-plan signup.
  • International inbound calls.Suppose you have a lot of international family, friends or clients and you want them to call you cheaply. Skype offers a service called SkypeIn, whereby you lease (for $38 a year) a standard public phone number from Skype. You can set your number to be in any local area code in any of 14 different countries. So if you have a lot of customers in, say, Sao Paolo, you can lease a SkypeIn number in their local area code, and they can then call you without incurring long-distance charges. You can have as many as ten active SkypeIn numbers per Skype account.

Now, if the idea of making phone calls from your PC sounds a bit inconvenient -- and it does to me -- there are solutions. You can buy a Wi-Fi phone from companies such as Linksys, Netgear or Belkin that come preloaded with Skype software.

These Wi-Fi phones look and act like standard cell phones, and they work as long as you're in an active Wi-Fi hotspot.

Apple's

(AAPL) - Get Report

iPhone will support Skype as well. Some hybrid cell/Wi-Fi phones allow you to transition from cell service to Wi-Fi and back to cell without interrupting a call, but these are still a bit expensive.

There are still some limitations to using Skype.

First, you must have Internet access where and when you use Skype (Wi-Fi is OK). Second the "free," wholly-Internet based call requires both users to have Skype and to have their computers turned on. Finally, to receive calls on Skype, you have to purchase a special phone number.

But I do expect the integration of Skype with ordinary cell-phone services to grow. As with other new digital technologies, there are still a few kinks, but I believe this is where things are going.

If you make a lot of calls -- especially international -- and if you travel overseas a lot, the Skype solution is definitely worth a try.

Jennifer Openshaw, a passionate advocate for helping Americans improve their finances and build their personal fortunes, is CEO of

The Millionaire Zone and America Online's personal finance editor. In addition to appearing regularly on TV shows such as "Oprah" and "Good Morning America" and on CNN, Openshaw is host of ABC Radio's "Winning Advice" and serves as an adviser to some of America's top corporations. Her new book,

"The Millionaire Zone," will hit bookstores in April 2007.