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Vonage Plays A Role In The New Telephony Upheaval

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The New Telephony: A New Alphabet Soup Spells Industry Upheaval

April 19, 2005

By Bruce Meyerson

What do you get when you combine Voice over Internet telephony, Wi-Fi wireless access and cell phones?

Aside from an acronym-induced headache, you get yet another new telephone technology with the potential to shake an industry already whipsawed by tectonic change.

That may sound a tad dramatic, especially coming from a business known for tall predictions. Skeptics say it remains entirely unclear how and when VoIP, or Voice-over-Internet-Protocol phone service, will intertwine with cell phones and wireless Internet access - or whether any part of the business will suffer as a result.

And yet the appeal is obvious.

Imagine how nice it would be if you're talking on a cell phone when you arrive at home or the office and the call doesn't cut off or turn fuzzy when you step inside.

Instead, the call passes without interruption from the cellular network to the wireless Internet signal inside the building, as imperceptible to the user as when a call gets passed from one cell tower to the next.

Would that be the magic bullet that persuades more people to discard their old-fangled phone lines and go all-cellular? For those who've already replaced their regular phone service with VoIP, would there be less of a reason to keep two phone numbers if a cell can pull double duty?

Opinions vary, of course. At this point, the pros can't even agree on what to call this technological mixture, with possible names ranging from VoWF and Vi-Fi to bigger mouthfuls like wVoIP, VoWiFi and VoWLAN.

Nevertheless, few players in telecommunications doubt that the industry's fastest-growing sectors are destined to converge.

Top equipment makers are already placing bets on the outcome, including Motorola Corp., Nokia Corp., Siemens AG and Alcatel SA. So are a growing number of cellular service providers, mindful that upstarts are already running trials on mobile VoIP, yet apprehensive about the impact on profits.

Many of these companies collaborated on a new standard, Unlicensed Mobile Access, that governs the handoff of phone calls between cell towers and Wi-Fi access points. In February, UMA was adopted by an industry body that sets standards based on GSM, one of the world's two dominant cell technologies. Standards groups are also adapting a network technology called IMS, for IP Multimedia Services, for passing phone calls between cellular and Wi-Fi networks.

UMA trials are underway with two cellular operators in Europe and one in United States, according to Steven Shaw, director of marketing for Kineto Wireless Inc., a provider of UMA network and handset software.

So far, only two UMA-enabled handsets have been announced, both by relatively unknown device makers. But recent announcements by Royal Philips Electronics NV and Texas Instruments Inc. that they're making integrated cellular/Wi-Fi chipsets are a sure sign of demand from cellular operators.

These developments likely won't translate into full-blown VoIP-enabled cell phones until at least later this year, if that soon. But as an interim step, simpler renditions of wireless Voip are already available.

On the most basic level, the collision of Voip and wireless can mean little more than a souped-up version of the cordless phone: The wireless signal is carried between a cordless handset and a Wi-Fi router connected to a high-speed Internet line rather than a base station plugged into a phone jack.

Net2Phone Inc. has been selling a $175 wireless Voip handset to go with its VoiceLine service since October. Voip leader Vonage Holdings Corp. plans to follow suit later this year with a lower-priced handset.

While these devices don't provide cellular's freedom to wander afar, the combination of wireless and Voip can be far more potent than a mere cordless phone.

The Net2Phone handset can be configured to connect with more than one router, so a customer can use the same device and Voip phone number at multiple locations, such as both home and work, and any other noncommercial wireless hot spot. Vonage plans to add compatibility with Wi-Fi services sold at retail locations such as coffee shops and airports.

But what if you don't want to carry both a cell phone and a wireless Voip handset?

For now, the only option is to buy a PDA equipped with both a cell phone and a Wi-Fi transmitter, then download a third-party application to connect with a Voip service when you're near a hot spot.

However, there aren't many dual-radio PDA's on the market. And until recently, nearly all were based on Microsoft's Pocket PC operating system. As a result, most Voip applications for PDA's including Skype, SJphone and X-PRO are written for the Pocket PC platform.

In the United States, there are just two Pocket PC's with cellular and Wi-Fi radios: the iPaq H6315 from T-Mobile and the Siemens SX66 from Cingular. Elsewhere, there's only the Motorola MPx in Asia. Microsoft says it is working to bring Wi-Fi capabilities to its Windows Mobile platform for cell phones as well.

Industry players say the timing will depend most on wireless carriers, who not only need to trial the new technology but also overcome hesitations about convergence.

For many carriers, public Wi-Fi hotspots still compete with the cellular-based Internet services they've launched at a cost of billions. And compared with the improved efficiency that Voip provides on wireline networks, there's little gain in terms of the bandwidth required to connect a wireless call.

That said, wireless Voip could lighten the load on crowded cellular networks by allowing carriers to divert phone calls from their towers to Wi-Fi access points. According to a study by Kineto and IBM, connecting a call via Wi-Fi would cost an operator one-tenth of what it costs over a cellular network.

T-Mobile USA, a national wireless carrier with limited cellular capacity and the biggest investment in Wi-Fi, is widely know to be interested in melding its two networks.

Industry sources say the company, a member of the UMA consortium, may introduce a cellular/Wi-Fi phone by the start of 2006. It is already diverting some data traffic off its cell network, offering iPaq Internet users an instant switch to Wi-Fi whenever they're near a hot spot.

The United States could be one of wireless VoIP's first proving grounds because Wi-Fi's popularity here has led to a wide deployment of hot spots, providing a ready infrastructure for cellular handoffs.

The three biggest U.S. carriers, Cingular Wireless, Verizon Wireless and Sprint Corp., have all mused publicly about adding Wi-Fi and Voip to their cellular mix.

Wireless Voip also may enable cell phones to siphon more call traffic away from the traditional wireline business. That's an appealing prospect for all-wireless plays such as T-Mobile or Sprint, which plans to spin off its residential phone business as part of its merger with Nextel Communications Inc.

But perhaps the biggest motivation for cell carriers may be to make sure they don't get left behind.

A number of would-be rivals are launching trials with mobile Voip based solely on Wi-Fi and a next-generation version of the technology called WiMax.

Tower Stream Corp. recently completed a trial using pre-WiMax in its home town of Middletown, R.I., and plans to launch another in a square-mile patch of Manhattan using Wi-Fi.

Even those who warn against over-hyping wireless Voip see the technology as irrepressible.

Tech commentator Mike Masnick noted in a recent column for that the mounting debate over whether cell phone calls should be allowed on airplanes could be rendered moot by wireless VoIP.

With Wi-Fi Internet access sure to become commonplace on airplanes, anyone with a VoIP-enabled PDA would be able to circumvent a cell ban.

"The fact is that people are going to figure out a way to talk if they want to talk to people on the ground," he wrote.

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