Vonage VoIP Services Changing Phone Business

Merging Services Shake Up Phone Business

April 3, 2005

By Staff

NEW ORLEANS — Cellphones and Internet-based calling revolutionized the traditional phone call. WiFi cut the Internet's cord.

Now the three technologies are coming together, changing the rules of business communication and aiming at consumer wireless services and devices.

Cellular companies have taken notice and are moving to adopt the technology to expand their own offerings and keep an eye on a potential competitor, particularly for business customers.

"We're really at the pioneer stage," said Frank Hanzlik, managing director of the Wi-Fi Alliance, an Austin-based trade group whose members include Dell, Intel, Microsoft and Texas Instruments.

"The carriers are recognizing that voice over IP isn't going away and WiFi and hot spots are not going away," he said. "We're seeing a lot more awareness that WiFi and cellular together are really offering a very powerful combination."

That combination was an undercurrent running throughout CTIA Wireless 2005, the annual wireless industry convention held in March by the Cellular Telecommunications and Internet Association.

At the show, many new "smart phones" — cellphones with computer functions — included WiFi to allow e-mail and Web surfing. At least one handset was specifically geared toward allowing voice calls to roam between cellular and wireless Internet networks.

"You can start thinking about single phone number across anything that you do, with maybe charges that aren't so significant," said Ellen Daley, a Forrester Research analyst who focuses on the new calling technology.

Industries that are particularly interested include large retail chains, insurance companies with branch offices, and health care, where medical staff can communicate over hospital networks, Daley said.

"It replaces your desk phone," she said. "You can have a single phone number no matter where you walk in the business."

Merging a WiFi and cellular phone means that number can range beyond the office.

Motorola's CN620 handset is the first that can roam between an office WiFi network and the type of cellular system used by Cingular Wireless and T-Mobile.

Compared with cellular networks, WiFi coverage is scarce and has far less range.

Still, wireless Internet calling is available to some consumers. Free software and programs from companies like Vonage can transform a PDA with WiFi into a makeshift phone.

One benefit to carriers in bringing cellular and WiFi together would be shifting the burden in busy communications areas away from strained cellular networks.

"Everyone is talking about the WiFi solution," said Kirk Parsons, a senior wireless analyst with J.D. Power and Associates. "Instead of building another tower, they can use an existing frequency to tap into and maybe offer some additional services."

But he said voice over WiFi is unlikely to go far as a standalone product and will be swallowed up by cellular service.

As the technology spreads, a regulatory fight is likely as government officials ponder where wireless Internet calling fits in the framework of fees.

Other challenges for voice over WiFi include the merging of technologies in a single device, coming up with industry standards to govern the roaming to cellular networks and a way to charge for both types of calls.

Industry officials and analysts agree that the ultimate goal for merging WiFi and cellular is a seamless experience for consumers, who would roam to the best network automatically to save money or get faster speeds.