Carrying voice over packet networks can save a business toll charges in two ways. First, handling intracompany calls on a data network avoids toll charges completely. Second, routing outbound calls to the closest point in the data network to the call's destination - a practice often referred to as "hop on, hop off" - reduces toll charges.

Kanematsu U.S.A., the New York-based subsidiary of a Japanese import-export trading company, is saving 60% to 70% on its calls to Tokyo and Osaka by using Internet telephony to avoid toll charges. "Before we got voice over packet, we had four voice-grade circuits running on a 64K line to Tokyo, which meant only four people could utilize those lines at a time. The rest of the people were making international calls," says George Emmett, assistant manager of telecommunications.

The lower quality of voice over IP compared with standard phone service is a barrier for some people, but that's changing. "In the beginning, there were a lot of jitters," Emmett concedes. "We weren't able to use it for fax. But over the last year, the quality got much better. It's to the point where the users accept it as a normal phone call." Nevertheless, the company is planning to move its voice-over-packet traffic to its internal frame relay network to boost consistency, he says.

The cost savings favor mid-size businesses over large businesses because big companies generally get volume discounts from the carriers. Fortune 1000 companies "will save money, but it is relatively insignificant compared to the overall cost and hassle," says Maribel Lopez, a network strategies analyst at Forrester Research, a Cambridge, Mass.-based market research firm. "The only place you'd save money is internationally because domestically you have great rates."

A third cost savings option, consolidation, doesn't depend on the price of a voice call. Consolidating networks can simplify a company's network infrastructure, reducing the cost of equipment, management and maintenance.

Businesses can't keep doing things the way they are, says Tom Noto, director of information services at Station Casinos in Las Vegas. "We can't have three networks: a voice network, a video network and a data network," he says. ''The cost savings is astronomical if we start taking these networks and melding them together."

Station Casinos, which runs four hotel/casinos, has deployed an ATM network based on 3Com gear to replace its Ethernet network. The company saves about $200,000 per year by handling intracompany voice calls on the ATM network, Noto says. The next phase of the company's convergence plan is to merge video onto the ATM network, which will save Station Casinos an additional $300,000 per year, Noto says.