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VoIP phone service saves money on phone bills

VoIP (Voice over Internet Protocol) is digital phone service that uses a high-speed Internet connection to bypass your normal local telephone company. VoIP service can supplement your regular landline phone, saving money on long-distance calls. Some VoIP users eliminate their landlines entirely.

There are two main categories of VoIP: hardware-based VoIP -- such as Vonage (Est. $12 per month and up) and cable VoIP (Est. $12 to $60 per month) -- and software-based VoIP such as Skype (free for PC-to-PC calls). Google offers two ways to make phone calls from your computer: Voice Calls from Gmail (Free to U.S. and Canada) and Google Hangouts (free video calls between Google+ users).

Software-based VoIP makes phone calls directly from your computer; a microphone and headset will improve sound quality. Hardware-based VoIP uses a regular telephone, although sometimes an adapter is required, and can work even when your computer is off -- as long as your broadband or cable connection is active. A phone using VoIP service rings and has a dial tone just like any other telephone, although some VoIP services work through your computer or even your cell phone.

Consistent call quality is a big factor in nearly all the VoIP reviews we read. Cable VoIP (Est. $12 to $60 per month) traditionally has the edge here because cable companies route calls over their own networks. Non-cable VoIP uses the Internet and is subject to bandwidth issues. International calls and calls during peak hours can have glitches like echoes and dropped calls. A major consumer survey shows that these problems plague Skype, a free service, more than the paid Vonage (Est. $12 per month and up) service.

If you aren't ready to give up your landline, see our reports on traditional long-distance phone service and cordless phones. Many cell phone plans now include nationwide long distance at no additional charge. See the ConsumerSearch report on cell phone plans for more information on those. In considering whether or not to choose a bundled cable plan, you might also read our report on ISPs.

When examining reviews, we looked for ratings and comments on performance and customer service, costs and features. We found a very small number of comparative reviews based on thorough testing, as well as a few large surveys rating VoIP services. ConsumerReports.org and PCMag.com provide reliable guidance on both cable and traditional VoIP, based on large- scale reader surveys and editors' expert VoIP tests.

J.D. Power and Associates' 2011 survey of more than 20,000 customers concentrates on general telephone services.  We found summaries of user-written reviews and ratings of VoIP providers at DSLReports.com (also known as BroadbandReports.com) and Amazon.com. We also analyzed user-written reviews and ratings of VoIP services at many other sites, including VoIPReview.org and NextAdvisor.com.