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Larry McKenna and John Gilchrist felt they were paying too much for local phone service. The two operate Eljay Shipping, a Brampton, Ont., company that acts as a sales agent for trucking companies. Early this summer, they switched their phone service to Toronto-based Primus Telecommunications Canada Inc. Now Eljay pays less than before and has a second phone number for fax service, says Mr. McKenna, Eljay's vice-president of operations.

The Primus service operates over Eljay's broadband connection to the Internet rather than over conventional phone lines. It's one example of how new technology and new players are offering small businesses real choices in local telephone service.

Although federal regulators opened local telephone service to competition in 1997, few smaller businesses or consumers had real choices until recently. Many companies that tried to compete with traditional phone carriers failed; those that survived did so by focusing mainly on larger, more lucrative business customers.

But now two categories of new players -- cable-television operators and companies such as Primus that offer phone service over Internet connections -- are bringing choices to small business.

Primus is one of two sizable national operators providing phone service via the Internet. The other is Vonage Canada, a Mississauga, Ont.-based subsidiary of Vonage Holdings Corp. in Holmdel, N.J. Both have packages designed for small businesses as well as consumer services. They require a high-speed Internet connection and can connect to ordinary telephones, and phone numbers are available in major centres across the country. These services cost $28 to $70 a month, depending on the provider and the features chosen.

These services offer interesting options that aren't available with most phone lines. Both Vonage and Primus allow subscribers to move the special adapters that connect their phones to the Internet to other locations. Anywhere you can find a high-speed Internet connection, you can connect and use your phone. Calls to your office number ring wherever you connect your phone.

Primus and Vonage also offer virtual phone numbers, which appear to be in another city but ring on your desk. Grant Fairley is marketing manager of Strategic Seminars, a four-person operation that moved from Toronto to Windsor, Ont., about a year ago. Six months before moving, Strategic Seminars switched to Vonage. When the company moved, Mr. Fairley says, it kept its Toronto phone number, adding local numbers in Windsor, London, Ont. -- where it has major clients -- and Detroit for U.S. business.

Most of Canada's major cable television operators are also moving into the phone business. Halifax-based Bragg Communications Inc., carrying on business as EastLink, was a pioneer, launching phone services in parts of the Maritime provinces in 1999, and has a phone package tailored for small businesses as well as bundles combining phone service with Internet access and cable television at discount rates.

Toronto-based Rogers Communications Inc. has also been in the phone business for a long time, being a major cellular operator and provider of voice and data services to larger businesses. Rogers has a small-business offering called the Individual Business Line, and the company has no problem with customers using its residential phone service for home-based businesses or home offices, says Phil Hartling, vice-president and general manager of Rogers Home phone service. Montreal-based Videotron Business Services has a similar service for business customers. Like EastLink, both companies offer bundles combining phone and Internet service. Shaw Cablesystems G.P. offers digital phone service for small business in its home city of Calgary.

Most cable companies' services are available only in limited areas, usually where the companies already offer cable TV. Rogers has the broadest reach, covering Toronto, Montreal, Vancouver, Calgary and Ottawa as well as much of Ontario and New Brunswick's three largest cities. EastLink covers much of Nova Scotia and Prince Edward Island and pockets in New Brunswick, while Videotron is only in Montreal and Quebec City.

Cogeco Inc. of Montreal, which operates cable television services in parts of Quebec and Ontario, offers residential phone market in several cities but has no services aimed at business customers to date. The terms of service for its residential service forbid business use.

Faced with such competitors, established telephone companies are trying similar offerings. Burnaby, B.C.-based Telus Corp. offers Business One, a small-business-oriented service combining high-speed Internet access and phone service over a single IP connection. Bell Canada, a unit of BCE Inc. of Montreal, offers Business IP Voice, a $59.95-per-month service that includes 300 minutes a month of free North American long-distance service.

Those seeking a real bargain on long distance may want to consider Skype, software that can be downloaded free. It works over any broadband Internet connection and allows unlimited free calling to regular phones within North America, and other Skype users anywhere in the world, and low-cost calls to regular phones anywhere at low rates. Originally Skype -- acquired earlier this year by eBay Inc. -- worked only on computers equipped with headsets, but recently special phones have been appearing that are designed to work with the service. Depending on the Internet connection, though, call quality is sometimes not as good as with regular phones.

Call quality is one issue that businesses should be wary about, warns Carrie McGillivray, an Ottawa-based analyst at telecommunications research firm Yankee Group Research Inc. of Boston.

"I would say sticking with the cable companies or the telcos is the way to go right now," she says. Still, Mr. McKenna says he can't tell the difference between his Primus service and a standard phone line. Mr. Fairley says he had some problems with call quality on Vonage at first, but it has improved, and he believes the quality of the phone itself makes a considerable difference.

Phone options

Here are alternatives to the established phone companies for small businesses:

EastLink Business Telephone or Home Office Telephone, from EastLink, available in parts of Nova Scotia, New Brunswick and Prince Edward Island.

TalkBroadband Pro or TalkBroadband Enterprise, from Primus Telecommunications Canada Inc., available nationwide but local numbers available in 20 locations.

Individual Business Line, from Rogers Communications Inc., available in Vancouver, Calgary, Montreal, Fredericton, Saint John, Moncton and most of Ontario

Digital Phone for Business, from Shaw Cablesystems G.P., available in Calgary.

Business Line, from Videotron Business Services, available in Montreal including north and south shores, parts of Quebec City

Entrepreneur Pro or Unlimited, from Vonage Canada Inc., available nationwide with local numbers available in 86 communities.

For the full list of providers, their features and prices, go to http://www.globeandmail.ca

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