Undergraduates reading this column who originally hail from other parts of the country have become intimately familiar with a very powerful and lucrative racket around these parts.

No, I'm not talking about Whitey Bulger or the restrictive practices of the Harvard Square "Business Association." No, the biggest moneymaker seems to be our friends at the Harvard Student Telephone Office (HSTO).

But don't blame the good folks at HSTO for our rates, which are marginally higher than the best deals available. The real culprit is MCI, Harvard's long-distance provider. Frankly, the long-distance industry has profited handsomely from years of market control, and the high rates charged by the Big Three demonstrate that.

In today's wired society, however, there's a movement to bring real competition to the long-distance phone market, and the source of these cheap connections is an unusual one: major commercial Internet providers.

Traditional phone companies provide long-distance access through the public switched telephone network, or PSTN. This network has existed for decades, an outgrowth of the early switched networks of Ma Bell.

PSTN is really a throwback to the days of the oldest phone switchboards. When a long-distance call using the network is made, the switching network connects the caller and the recipient's telephones via a series of analog telephone lines.

Of course, hundreds of thousands of these lines transverse the continent. But a single point-to-point call uses up an entire line, or series of them; traditional analog phone systems can't share the line with other callers.

Enter Internet telephony. The idea is simple: Internet phone companies digitize the voices of the two people speaking on the phone and send the voices as packets through a standard high-speed IP connection instead of the PSTN. Because packets don't have to be sent in order or in sync, many more callers can be accommodated through relatively cheap, high-speed fiber lines. No computer is required on either end--IP phone companies take advantage of local phone systems to be the front--and back--ends of their calls.

The use of digital and IP technologies isn't the only reason why Internet phone companies have a price advantage over their competitors. More important is the matter of access fees. Traditional long-distance providers have to pay access fees to local phone companies to reimburse them for the use of their customers' phones to "reach" the PSTN. For instance, a call from Boston to Orlando requires MCI to pay access fees to both Bell Atlantic and BellSouth--fees which are, in turn, passed on to consumers.

The FCC, however, has exempted IP telephony companies from these access fees, allowing them to charge much lower prices for long-distance service.

But there are disadvantages as well. One downside to IP telephony is voice quality. Because packets can arrive out of order, there can be delays and "stutters" in the conversation. Quality is improving over time, however, and IP telephone quality should soon be virtually indistinguishable from that of regular long-distance service.

Another downside lies in the dependence of IP telephone companies upon the existing phone system. If local direct-dial and touch-tone phone service were not available nationwide, none of these firms could even offer their services.

Plus, there is not even the assurance that IP telephone rates will always stay so low. By being exempt from access fees and other taxes, these IP phone companies are essentially being allowed by the government to steal a slice of the telephone pie without being subject to the same taxes and fees their competitors pay. Beyond giving them a somewhat unfair competitive advantage, this goes against the FCC's long-standing tradition of funding itself and wide-spread telephony access through taxes on long-distance phone service.

As unfair as this may be, the FCC claims it is exempting this new slice of the industry from taxes only long enough for it to get off the ground. Once they start pulling their fair share of the tax burden, though, one can expect IP telephony to become a bit more pricey.

Of course, undergraduates can't take advantage of these new, low rates in the meantime, since it is practically impossible to switch away from HSTO service. But a residential customer can begin reaping the benefits. International Discount Telecommunications charges a paltry five cents per minute for domestic calls, and calls to London cost only slightly more, at nine cents per minute. And the best part about Internet telephony is that these rates are good 24 hours per day, seven days a week.

Kevin S. Davis is an independent computer consultant and student director of the Harvard Arts and Sciences Computer Service's (HASCS) Advanced Support Team. You can reach him at ksdavis@fas.harvard.edu.