Although the dial has changed to buttons and the material from bakelite to plastic, the phone that you use hasn't changed that much since it was invented over 100 years ago.

It might be digital, it might tell you who's calling, but when you make a phone call you're still directly connected to the person at the other end just as if an operator had plugged a cable into the switchboard.

The age of that technology is now drawing to a close. BT announced last year that it is to build a new communications network designed to handle data every bit as well as its bread-and-butter voice calls, and it's where most UK telephone calls and all data will end up within a decade.

The cables that run to our homes will remain the same but the equipment in telephone exchanges is to be phased out in favour of a technology that web users will have heard of. It's called Internet Protocol and it is the standard used to direct data around the internet.

Voice calls can be digitised (turned into computer data) in the same way that images can be scanned or music copied to a hard disk. This means there's every reason to treat it the same way as other forms of data and let it roam the internet.

The idea has bred a standard called Voice over IP (VoIP) and companies are beginning to offer more and more services based on the technology. The chief benefit to consumers is that calls made using the internet are far cheaper, and in some cases free. It's also easy to set up and use.

Here, we're going to explain how you can take advantage of internet telephony and save yourself bundles of cash.

Packet in
Sending voice data over a telephone network using internet rules is cheaper because the information is distributed in a very different way. When you make a traditional phone call, the telephone provider's equipment sets up a dedicated link between you and the recipient using very fast automated switchboards. This is rather expensive and requires specialised equipment.

Data is transported around the web rather differently. Like all computer data, the voice call is chopped up into small pieces called packets and each is given its own instructions on how to reach its destination (known as the IP address).

Each packet must make its own way at lightening speed through the internet's equivalent of switchboards, which are called routers. When a packet arrives at a router, it announces its destination and the router sends it on the best path to the next router, where the process is repeated until the packet reaches its destination.

They might not arrive in the same order, but that's where your computer steps in, making the numbered packets line up and placing them in the correct order before processing them and playing them as sound - your voice - in the telephone application.

Improved quality
If you've used internet telephony in the past, or even voice chat via an instant messaging program, you might well have been unimpressed with the sound quality. It can often sound like bad reception on a short wave radio and sometimes you miss out on chunks of the conversation completely.

So does this mean that BT is going to inflict that sort of problem on all of us? Thankfully not. Although early attempts at internet telephony didn't work very well, it's much better now. The spread of broadband has helped as call quality depends a lot on the speed of the connection. And as more people have chosen broadband, more of the networks that make up the internet have been upgraded.

With call quality improved, more and more internet telephony services are being offered and competition between them means that the price of calls is much cheaper, especially for international calls.

Phone companies don't need to lay expensive phone cables under oceans and across continents any more, they just send information to the internet. If you're calling an ordinary phone at the other end, the packets can be transformed into a traditional call signal closer to the destination exchange, so money is still saved.

Finally, many of the configuration difficulties that dogged internet telephony in the past have been solved, so it's much easier for the novice user to get up and running.

What you need
First, of course, you need an internet connection, and it really is best if you have broadband. While you may be able to make a call using a dial-up connection to the net, the sound quality won't be very good, especially if you're doing anything else with your computer at the time.

And, of course, since broadband is 'always on' you can stay connected and let people call you over the internet whenever they want to. It's not possible to use 'broadband accelerator' software, such as Onspeed, to make a slow internet connection suitable for telephony, since such programs only work on particular types of data.

Once you've sorted out your internet connection, you'll find there's a wide range of products for internet telephony. At its simplest, all you need to get going with internet telephony is a sound card, which most modern PCs have already, together with a microphone and speakers, and some internet phone software.

You'll get the best results if you use a headset, but if you don't want to feel as if you work in a call centre, some services work with special telephone-style handsets that plug into your computer's USB ports. They're easier to use, but you may not be able to use one handset with the software for another service, if you later decide to switch.

If you don't like the idea of being tethered to your computer for making calls, you can also buy sophisticated devices that can be plugged into your phone line and internet connection, automatically routing calls via the internet or the normal phone network.

That last point is quite important to bear in mind: don't disconnect your phone just yet. As internet phone services don't have the same legal obligations as traditional phone companies to provide you with access to the emergency services, you'll still need an ordinary phone to dial 999 for the time being.

Skype
Skype is free and is one of the most talked about internet telephony services. It was created by the same people who designed the Kazaa file-sharing network and uses this much maligned technology to route your calls, and it manages to provide pretty good quality connections. At the moment, though, it doesn't offer a way for people with ordinary phones to call Skype users. You can download the free Skype software here.

Unlike a normal phone network, Skype appears to look more like instant messaging software; you register with a name, rather than a number, and add contacts to a list that shows you when people are online. It's simple to use, and available for PC, Mac, Linux and even Pocket PC computers, so you can use it on just about anything.

As with other internet telephony services, it doesn't cost anything to make calls to other users of the service, and you can make calls to ordinary phones via the SkypeOut service, which has simple-to-understand pricing. But watch out for the small print; if you don't use up your credit, it expires 180 days after the last top-up.

NETeasyPhone
www.neteasyphone.net
Like Skype, NETeasyPhone requires dedicated software, so you can only make free calls to other users of the same system. Just as with Skype, you can see if people in your contact list are available or not via the on-screen display.

Although the software can be downloaded free of charge and used for 21 days, you'll have to pay £30 to register a lifetime ID after that, something that's not necessary with most other internet telephony services. The ID is a mixture of a name and numbers and is used instead of a traditional phone numbers.

A useful touch for many users, especially if you want to persuade everyone in your household to make calls over the internet, is that the software supports USB telephones, which are dedicated handsets, including a model with a keypad, that connect to your PC.

There's even an adapter that enables you to plug an ordinary phone into the PC, but we were put off by the message telling us to turn off the Windows XP firewall when we started the software. As with Skype, the service allows you to make calls to real telephones around the world at fairly competitive rates.

VoIPtalk
www.voiptalk.org
While Skype and NETeasyPhone ask you to download their own dedicated software, which is designed primarily for ease of use, they also restrict you to contacting people on the same network. It's a little like the way you can't send instant messages to people on both Yahoo and AOL without downloading the two programs.