If you're like most people, then your monthly telephone payment is simply a must-have bill that has to be paid. When it comes time to tightening up the budget or get rid of some of the luxuries, the phone bill will probably be near the bottom of the list. But that doesn't mean you can't do anything to reduce your monthly payment. One alternative many people are starting to use now is Internet telephony, also known as Voice Over IP or "VoIP" for short. But how does this stuff work and can it really save you money?

Internet Telephony 101

In a nutshell, internet telephony works by using your existing internet connection to make phone calls. You simply sign up with the service provider of your choice, choose your calling plan (similar to when you sign up for mobile phone service) and you can take advantage of quite a few benefits over traditional telephone service. First, the phone company charges you extra for long distance calling. If you make a lot of long distance calls, you might not have any idea how much your phone bill is going to be until they mail you your statement. That can be a real shock if you're not keeping track of your calling but with most internet-based phone services, long distance is included in the flat monthly rate.

when you sign up for most internet phone services, you can either keep your existing number, choose a new number or do both. The benefits of keeping your old number are obvious. But there are some advantages to adding a second number also. That's because when you pick your new number, you can choose any area code, even if it's not in your local area. So imagine you have family or friends that live across the country. You could simply add a second number based on their area code, which would cost you a few extra dollars per month. Then, they can call you anytime they want and to them (and on their bill) it's a local call. Depending on how often you talk with friends and family out of your local area, this might be an attractive, money-saving option for you.

Another great aspect of internet telephony is that most services offer you a wide range of features as a standard part of their calling plans. These features are normally things you would have to pay extra for when you sign up with your local phone company - features like call waiting, caller ID, voice mail, call forwarding, etc. Features like these usually come as a standard part of the calling plans offered by the major providers. And the calls are just as clear as what you get with your traditional phone service, if not better.

Monthly Cost and Equipment Needed

Internet phone service can run anywhere from $9 - $10 on the low end up to $35 - $45 on the high end, depending on the company and calling plan you choose. This is typically a flat fee with no extra hidden charges, taxes or anything else tacked on to your bill. To take advantage of internet phone service, you will need the following an internet connection, a regular telephone and an adapter for your phone to make it compatible with the service (usually supplied by the company). You might also choose to purchase a phone specifically for your new internet phone service, but there's no need to do that initially.