Phone service

Last reviewed: May 2011

Phone service from a major carrier makes sense for many households, especially if it's bundled with Internet and TV service at a nice discount. But changing or eliminating such home-phone service can be a practical way to slash telecom bills. If you drop home phone service from a major carrier and use one of the options below, you could save $20 a month or more.

Consider low-cost VoIP services

Many homes already have Voice over Internet Protocol (VoIP) phone service from their cable company, Verizon FiOS, or AT&T U-verse. Costs usually run about $30 a month as part of a bundle or about $50 à la carte, including a long-distance plan.

Our Ratings include alternative VoIP services, described below, that cost less—from nothing to about $25 a month for unlimited domestic calls, plus an up-front cost for equipment in most cases. Taxes and fees can add a few dollars a month.

  • Ooma. It was among the top-rated phone services of any type in our survey. The equipment is pricey, $200 and up, but unlimited domestic calling is free. (You do pay $3.50 a month in taxes.)
  • Vonage. Like Ooma, Vonage requires a small adapter that you hook up to your Internet connection and existing phone. The adapter costs $80 but at press time was free after rebate. The "Lite" plan provides 200 minutes for $10 a month. Vonage did well in our survey. Only one cable company had a higher score for overall satisfaction. Survey respondents also judged it a better value than most other providers. It was competitive with cable companies for reliability and voice quality.
  • MagicJack. You can plug any phone into MagicJack, then insert it into your computer's USB port and use your phone as usual. It costs $40, which includes a year of unlimited domestic calls; an additional year costs $20. It was rated an outstanding value but was among the worst-rated for voice quality and reliability.
  • Skype. Unlike the other services, Skype requires no dedicated hardware. Once you sign up for a free account online, you can make free, unlimited voice or video calls over your computer, smart phone, or TV to any other Skype subscriber, using any standard headset and video camera. You can also pay to call regular landlines and mobile phones, by the minute or by the month. Skype also has its own computer-free option, known as RTX Dualphone, which costs $170 for the base station and a single handset and requires a broadband Internet connection. Skype was judged an outstanding value, but Ratings for voice quality and reliability were among the lowest, and it doesn't support 911. For that reason, the company recommends retaining another phone with landline service to use for emergency calls.*

Newer cost-saving choices might suit you, especially if you often call countries with high per-minute rates from major phone companies. Ooma offers international calls to 70 countries for less than a penny a minute. Vonage has unlimited calling to 60 countries for $26 a month. MagicJack and Skype allow free calls to other users anywhere in the world and have low rates for calls to nonsubscribers.

Before you think about dropping phone service from a bundle, see how much that will save you. The cost of the TV and/or Internet services may jump, which will eat into savings. Still, you'll probably pay less using a service such as Ooma with TV and Internet services from a cable or phone company. But you'll lose other pluses to bundling phone and TV service, such as having caller ID info pop up on the TV when your home phone rings.

Note that any VoIP system won't function during a power outage unless you have a backup battery. Also, many home alarm systems require a landline, and some VoIP options might not meet those needs.

Rely on your cell phone

About one in four U.S. households now relies entirely on cell phones at home. That requires decent reception. If you get a strong signal in only one room, you can connect your cell phone to a special cordless phone system to pipe calls around the house. One caveat: Another Consumer Reports National Research Center survey found cell phones to be acceptably reliable for 911 emergency calls but not as useful to operators in determining the caller's location.

*Editor's note: The original version of this story omitted the facts that Skype offers its own hardware and that the company recommends supplementing its service with a landline for emergency calls.