When Todd Jespersen ran out of phone capacity at his growing architecture firm, he decided it was time to reach for--what else?-the Internet.

Jespersen convinced his partners at Kruger Bensen Ziemer Architects Inc. to make the switch to Voip, the acronym for Voice over Internet Protocol. The move has saved the Santa Barbara firm, which has its employees spread across three offices and multiple buildings, $300 to $400 per month--and thrust the firm into the forefront of the latest telecommunications revolution.

"It was a little scarier for the partners ... but once the data came out about the cost savings per month, we could see our return on investment," said Jespersen. "We figured if we were going to do the system upgrades, now would be the time."

Called the "next killer app" by some and a premature technology by others, Voip is beginning to draw interest at all levels.

With Voip technology, telephone calls are made using a computer network--over data lines rather than phone lines--thus bypassing the regular toll charges of the telephone. The voice signal is converted into a digital signal, which then travels over data lines and gets converted back into voice at the other end.

Internet phone service company Vonage, based in New Jersey, has made the biggest Voip splash, signing up 700,000 residential subscribers, including 50,000 in Los Angeles, with an ad blitz over the past year. Its primary focus has been on the residential market, with about 20 percent of its subscribers being small business owners.

Boeing Co. and Bank of America have made the switch to Voip using Cisco Systems networks, while telecommunications companies AT&T Corp., Verizon Communications and others are making the service available to both residential and commercial customers. Comcast Inc. and Time Warner Cable offer the service through digital cable lines.

Cisco has sold 5 million Voip phones to customers, though many were bought by large Fortune 500 customers that bought tens of thousands or more at a time.

"Obviously small businesses will be attracted to this type of service," said Gene Walton, founder of technology research firm Walton Holdings.

Telecommunications revolution

Some versions of Voip service involve sitting in front of a computer with head phones. But the kind KBZ Architects installed--and what Vonage offers--is conducted through traditional phones plugged into high-speed data lines.

Vonage requires businesses to purchase a piece of hardware, called a Voip gateway, from the company or one of its resellers, which typically runs between $1,000 and $3,000. But that covers installation and promises big savings on monthly phone bills.

"Small businesses save anywhere from 35 to 50 percent off their phone bill. With the typical phone bill ranging from $500 to $5,000, you can do the math," said Mark Lyons, the company's vice president of sales.

One of Vonage's plans, which targets companies from five to 100 employees, offers unlimited calling, starting at $49.99 per month. Plans offer up to 24 phone lines, but Lyons said most small business customers use eight lines.

SightSpeed Inc., based in Berkeley, offers business customers four-way conference calling, allowing four different users to appear on a computer screen. The cost is just $5 per month for unlimited audio and video calling, with multiparty conference capped at 15 minutes per day. Unlimited conferencing costs $14.95 per month.

Chief Executive Brad Treat said one quarter of his customers are small business owners who use the service on a standard lap-top computer with a webcam attachment. But Treat isn't marketing his service as a telephone replacement, but as a business tool.

In the case of KBZ, the architectural firm employed a communications contractor that installed Cisco hardware. The big goal was to have a unified phone system for all its offices. The company operates out of three buildings in its Santa Barbara headquarters, with a branch office in Ventura and one opening in Lompoc. It had a phone system from Lucent Technologies, with its Santa Barbara offices in Verizon Communications territory and its Ventura office in SBC Communications Inc. territory--so interoffice calls were long distance.

The company has reaped big monthly savings and the installation of the system was relatively painless, Jespersen said. The contractor built the network side-by-side with the firms' existing network, and when it was ready to transfer, it was done in just a few hours, after-hours.

But it wasn't cheap. The firm anticipated spending $40,000 to $60,000 to upgrade its phones, but the total bill came to more than $100,000. That included new servers, new rack systems, and fiber-optic cabling. "Like any good project, the scope seems to creep," Jespersen said.

Technology pitfalls

Though more businesses are moving to Voip technology, it's coming slowly. Concerns about the technology range from voice quality to network fallibility.