NEW YORK – Two Internet telephone services debut Monday with unusual business approaches, hoping to stand out in an increasingly crowded market with intense price competition.
Lycos, the Internet portal owned by Daum Communications Corp. of South Korea, is launching a Windows-based program that provides free calls to phones when the user signs up for promotional offers for credit cards or Netflix's (NFLX) DVD service. The software also shows banner ads.
Users who don't sign up for offers will pay 1 cent a minute for domestic calls when they exhaust their initial 100 free minutes.
Some European voice-over-Internet companies, like Voipdiscount, have been providing free calls to countries including the United States. They don't however, provide free U.S. phone numbers for incoming calls, which Lycos does.
The Lycos Phone application also offers movie previews, PC-to-PC video calling and text messaging.
The other new service seeks to radically simplify Internet calling, which works by breaking voice calls into data packets just like e-mail, sending them over the Internet and reassembling them into sound at the recipient's end.
Roman Scharf co-founded Jajah, a company that released a for-pay PC-to-phone calling software last summer. He soon found that users were attracted to the service only because it was cheap, and he worried about his future given cheap and free options elsewhere.
"It's no good if you have a service that only works because it's cheap," Scharf said. "There's always somebody who is cheaper."
So the company took another tack and decided to compete by making it simpler to place calls.
Users go to the company's Web site and enter two phone numbers — their own and the number to call. The company rings the caller's number, and after the user picks up, it dials the other number. If the call is answered, Jajah connects the two lines.
There's no need to install software or get a microphone for the computer, and it's not restricted to Windows. The call goes from phone to phone, with Jajah's site and the Internet as the intermediary. Domestic U.S. calls cost about 1.7 cents a minute. A U.S.-France call costs 1.9 cents.
A "beta," or trial version of the site has been up since early February. Scharf would not say how many users have signed up already, but said that 59 percent of visitors to the site have signed up for service, and the company is "well on its way" to 1 million subscribers by the end of the year.
Jajah, which is based in Austria, is funded by U.S. venture capital firm Sequoia Capital.
The software-based VoIP providers are also competing with companies like Vonage Holdings Corp., which provide hardware that connects ordinary phones to a broadband Internet connection.