Internet telephony seems to have pierced the final frontier -- by offering international calls at around local dialling rates.

Today, while basic and cellular service providers are offering overseas calls for as much as Rs 12 to Rs 16 a minute, internet telephony firms are charging just a fraction of that.

World Phone, a joint venture between the US-based World Phone Inc and two Indian entrepreneurs, recently lowered the bar by offering Voice over Internet Protocol (VoIP)-calling cards, which allow subscribers to dial up numbers in the US, at Rs 1.60 a minute.

Aditya Ahluwalia, chairman of World Phone, says there is a large, unpenetrated market for VoIP services in India.

"We intend to expand the Internet telephony market by offering the cheapest price and the best quality of service," he said.

Voice over Internet Protocol; # Sify charges Rs 5 per minute under its 'iways' platform;
^ Rates vary between Rs 12-16 per minute, depending upon the package

There are other ISPs too that offer Net telephony, such as Net4India, Sify, In2Cable, but not at this tariff levels.

But Net4India seems to be the quickest to rise to the World Phone challenge: it will soon unveil a plan wherein customers are offered numbers across 10 states in the US and any call received (from anywhere in India) on these numbers will ring at the customers' premises.

This translates into unlimited talktime for calls made to the US and Canada. Net4India will charge Rs 2,900 a month for the service.

Unorganised players are also forcing companies to cut margins and offer calls at lowest possible rates.

But Ahluwalia counters: "At Rs 1.60 a minute, we still have a margin. We can slash the tariff even further."

A host of value-added services such as voice and video conferencing, fax over IP, managed voice services, unified messaging services and voice mail are in the offing too.

But the principal hurdle for VoIP companies is the low computer and internet penetration in the country at 10 PCs per 1,000 people. This has forced Net telephony companies to be innovative to expand the market.

World Phone will launch cheap IP modems -- the critical interface in Net telephony -- that can be affixed in PCOs or public call offices -- to make international calls.

It plans to manufacture the modems that will cost just Rs 1,000 compared with the present Rs 6,000 through a sister concern. The company is also in talks with manufacturers in Korea and Taiwan for cheaper technology.

The PCO model, in fact, seems to be an attractive business option. Net4India is setting up 'Phonewalla' PCOs across the country that are equipped with an IP-based device to provide clear international calls.

Small towns beckon too.

Jasjeet Sawhney, CEO, Net4India, plans to cast his net wide. "We have around 500 PCOs at present. We are adding 20-30 PCOs every month. We have targets to set up about 1,000 PCOs by the end of this financial year," he said.

Sify provides net telephony services through its nationwide network of cyber cafes called Iway. It is also expanding this chain. Research reports say there is immense potential for these kind of services. The voice telephony market in India is estimated to be worth Rs 33,000 crore (Rs billion), of which Net telephony has a 2 to 3 per cent share.

The International Data Corporation expects the IP telephony market to explode at a compounded annual growth rate of 119 per cent.

With broadband, the quality of Net telephony is expected to improve. Increased competition has also spurred ISPs to provide better voice quality through present channels.

"Our voice quality is on a par with that offered by the cellular service providers. The quality also depends on the speed of the Internet connection," says Sawhney.

With price taken care of, connectivity quality -- and speed -- becomes the final, new final frontier to pierce for the Net telephony industry.