CLEC Startup Offers Super-Cheap Telephony

As if traditional telephone providers didn’t have enough competition, a three-year-old startup now is offering ultra-low-cost telephony.

NetTalk is a publicly traded Competitive Local Exchange Carrier (CLEC) engaged in phone service using Voice over Internet Protocol (VoIP). NetTalk customers pay a flat fee of just $29.95 per year for voice technology enabled through a small device, dubbed the “Duo,” that connects to a customer’s home router, modem or computer.

To date, the company reportedly serves more than 400,000 customers.

The device and the digital phone service enables free nationwide calls to any phone in the United States or Canada from anywhere in the world. The Duo costs $69.95 and can be purchased online from such Internet retailers as Dell.com, Walmart.com and the Canadian portal for Amazon.com.

Kenneth Hosfeld, executive vice president at NetTalk, says it was important for the company to become a CLEC to receive the benefits of existing switching infrastructures and phone numbering systems.

"If your aunt in Norway calls you, that telephone call has to go through the public switched telephone network (PSTN)," explained Hosfeld, as an example. "We interface to the PSTN."

NetTalk has three central offices that connect the PSTN with customers’ DUO devices.

Better Than MagicJack?

NetTalk is somewhat similar to MagicJack, another telephony startup. MagicJack sells a small $39.95 device that plugs into a computer’s USB port. The device also has a phone jack to connect to a customer’s landline phone. MagicJack charges $19.95 per year for its unlimited nationwide calling.

NetTalk’s technology is different in that its device doesn’t require a computer. It has a phone jack for connecting to a customer’s landline, and it has an Ethernet port for connecting to a router. It also has a USB port if customers want to connect it to their computers.

"We put all the intelligence for call control in that little box because we’re not relying on the PC’s resources," says Hosfeld, adding the NetTalk Duo provides more portability than MagicJack’s service because Duo doesn’t have to be tethered to a PC.

Whether it’s MagicJack or NetTalk, the primary driver for new customers is the prospect of saving money.

Looking ahead, Hosfeld says NetTalk is working on a video technology called "NetTalk TV," which it plans to announce at the 2012 Consumer Electronics Show next January.

-Linda Hardesty