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updated 9/12/2006 8:44:37 PM ET 2006-09-13T00:44:37

Broadband provider Covad Communications Group Inc. is launching an inexpensive Internet-based phone system for very small companies that is compatible with conventional telephones.

The new service targets a market segment with limited options for affordable office communications technology.

Covad ClearEdge Office, to be announced Wednesday, is designed for operations with up to 20 employees. The price is $40 per month per user for unlimited U.S. calling, or $10 less than Covad's higher-end business service, plus a one-time fee of $250 for onsite installation, a router, an analog phone adapter and any new wiring that might be required, though in most cases existing cables would be used.

The service is only available through a bundle with Covad's broadband DSL or T1 connections, ranging from $66 to $270 a month — a requirement the company stresses as a benefit that allows it to ensure better sound quality by prioritizing voice traffic over computer data such as e-mail and Web page downloads.

A rapidly growing number of both consumers and mid-to-large businesses have been adopting Internet telephony, which converts calls into packets of data like any other type of online traffic.

Smaller enterprises have been slower to adopt "Voice over Internet Protocol," or VoIP, due to a combination of complexity that consumers don't face and substantial costs that only large organizations have the resources to shoulder.

Where a traditional office phone network can cost tens of thousands of dollars for installation, digital phones and other equipment, even an Internet-based service such as Covad's higher-end office system can cost thousands in setup and equipment costs.

One of the few lower-cost options for small offices wanting a networked VoIP system has been through 8x8 Inc., which says that between 80 percent and 90 percent of its roughly 4,000 business accounts are operations with fewer than 20 employees.

The Packet8 Virtual Office service, also priced at $40 per user for unlimited calling, is designed to work with a $99 analog desktop phone sold by the company, though it can also work with a customer's existing phone. Both setups require a free adapter between the phone and the broadband connection coming to each desk. There is also a one-time activation fee of $40 per extension, and a new optional service for onsite setup and training costs $199 for three users plus $49 for each additional extension.

Conceptually at least, Covad's configuration is potentially simpler as it requires one adapter before the broadband wiring is split into branches going to the various offices.

Like Packet8's, the Covad service features a Web dashboard for users to steer calls to different phone numbers and handle voice messages like e-mail. There's an optional "auto-attendant" for callers to reach a desired extension for $10 a month, a feature that costs $15 with Packet8.

But for now, Covad is not offering a computer-operated switchboard capability for a receptionist, an advanced capability Packet8 offers for $20 a month and that Covad provides with its higher-end suite. Instead, a receptionist would transfer calls using the desktop phone. Covad says it plans to add that capability in early 2007.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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