By FRANK VINLUAN

REGISTER BUSINESS WRITER

June 28, 2005

WebPoint Communications , a West Des Moines provider of telephone service over the Internet, has raised $2 million in equity financing from a nontraditional source of venture capital - 13 independent Iowa telephone companies.

The technology of Voice over Internet Protocol, or VoIP, has grown as people look to trim their phone bills. VoIP is cheaper because calls travel mostly over the Internet, not the public-switched telephone network.

But VoIP's growth has come at the telephone companies' expense as customers drop land-line service. The 13 independent companies see WebPoint as an investment in a potential new revenue source as traditional revenue streams decline, said Ron Laudner , general manager of OmniTel Communications in Nora Springs.

"None of us is so naive to believe VoIP isn't going to affect us," he said. "If we don't have a VoIP offering, that just gives a customer a chance to leave without a way to get them back."

Customers of OmniTel and other independent telephone companies will have the opportunity to use WebPoint's services. But Kha Phan , WebPoint's founder and chief executive officer, said he does not plan to undermine the customer base of Iowa's independent companies. Instead, Phan wants to bring VoIP customers to Iowa.

Iowa's 150 independent telephone companies serve rural areas, some with fewer than 1,000 people. But modern telephone-switching equipment can process calls for more than 100,000 people, so those companies have excess capacity, Phan said.

WebPoint plans to use the excess capacity to provide VoIP access for customers around the country and worldwide. Customers could get a WebPoint-generated Iowa phone number for free. That number will come with free features, such as voice mail and call forwarding.

Revenue will come from customers who want a number with a specific area code. For example, Chicago customers will have to pay extra if they don't want numbers with Ogden's 515 area code.

Phan said people can use the WebPoint number to supplement their land-line or wireless communications. Parents can create a "safe number" that their children can call to reach them anytime. People who work in sales can create a number for the exclusive use of customers.

Phan incorporated WebPoint in January with $300,000 in seed money from the telephone companies. The remaining funds were raised this month. Phan said he will not seek additional financing until the business is established.

WebPoint is still conducting tests. Phan plans to launch the service later this summer.