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This paper studies a VoIP phone service with 3D sound effects (3D effect phone), which gives users more feeling of being at a live communication than legacy phone services. However, since an IP network is a best-effort one, we must consider effect of IP performance degradation on the 3D effect phone service. This paper evaluates effect of a speech coding IP packet loss on horizontal sound localization by experiment. The experimental results show the following three issues. First, a 3D effect phone service is feasible. Second, ITU-T G. 711 encoding is more suitable to the service than Speex encoding. Third, IP packet losses deteriorate horizontal sound localization.