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Microsoft plans telephone service

Several independent companies - such as Vonage and Skype - already allow computer users to call normal phones around the world using internet telephony at rates of a few pennies a minute.

Instant-messaging

Yahoo is also in the process of introducing such a system, after it bought internet phone company Dialpad two months ago.

Microsoft currently uses Voice over Internet Protocol (VoIP) technology in a number of its products, including its instant-messaging service.

The US software firm said it planned to incorporate California-based Teleo's telephone service into its instant messaging service.

Microsoft said it hoped to achieve this by the end of the year.

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