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DSG International, the owner of high street retailers including Dixons and PC World, on Tuesday became the latest company to join the rush to offer internet telephony in the UK.

The DSGI launch sparked interest partly because of the success of Freeserve, formerly the UK’s biggest internet service provider, which Dixon’s founded in 1998 and sold to France Telecom, who renamed it Wanadoo.

The company has targeted 500,000 Freetalk customers in the first 12 months of the service’s launch, said Simon Turner, DSGI’s managing director.

DSGI’s “Freetalk” service allows customers with broadband internet – about 7m households in the UK - to make unlimited calls to UK landline phones by connecting a device to their phone which takes advantage of technology called voice-over-IP.

Freetalk is similar to Vonage, a US company which has more than 1m customers in its home country and launched in the UK four months ago.

The launch last month by search engine leader Google of a software-only VoIP service, followed by Ebay’s $2.4bn purchase this month of Skype, a small London-headquartered VoIP software maker that has 54m mostly non-paying users, has increased interest in VoIP around the world.

BT Group this week cut prices for its “Communicator” service, which it offers in conjunction with Yahoo! saying that some of its calls were now cheaper than Skype. Be, an internet service provider, this week launched the fastest broadband services (at 24 megabits per second) with equipment that includes voice capability that Be says is for “future use”. Broadband internet service provider PlusNet will also launch a VoIP service on Wednesday.

DSGI has partnered with a US company, 8x8 Inc, to provide the connection between the internet and the traditional phone network. GoogleTalk, BT Communicator and Skype can only be used directly from a computer with a headset, whereas Vonage and Dixon’s Freetalk use devices connect directly to a normal telephone.

“We believe this is a mass market potential. We’re very much emphasising this is about home telephony, not PC to PC,” Mr Turner said.

He said Freetalk would be had an advantage over Vonage, which he said have “no scale or distribution” in the UK despite its distribution deals with retailers Staples, Comet and Matlin.

“We could’ve taken Vonage and distributed it, but the difference is we own this product - we have structurally lower costs, lower customer acquisition costs,” Mr Turner said.

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