After shaking up the land-line telephone market, voice over Internet protocol (VoIP) technology is setting its sights on the wireless world.
New technology allows wireless handsets to make voice calls over WiFi data networks, the way consumers now make VoIP calls over wired Internet connections. Faster wireless networks, the emergence of WiFi hot spots in homes, businesses and cafés, along with the development of WiFi-enabled handsets, are all expected to make it easier to place VoIP calls on the go. The benefits for customers could include things like cutting airtime bills, and letting people replace land lines with wireless.
While this technological trend isn't mainstream, it's starting to attract interest. Vonage Canada Inc. yesterday launched a UTStarcom wireless phone that lets users make calls over a WiFi connection, although they still need a separate handset to use cellular networks.
"It basically allows you to bring your home [VoIP] phone service with you wherever you go," said Bruce Robertson, director of product marketing and programs at Vonage Canada.
Soon consumers will also have a choice of dual-mode phones that work on both cellular and WiFi networks. Toronto Hydro Telecom Inc., which is currently building one giant WiFi hot spot throughout the city's downtown core, has also been approached by vendors of WiFi and dual-mode handsets in recent months. The utility phone company is currently testing equipment to do VoIP over WiFi, president Dave Dobbin said. "We're engineering the zone for voice quality," Mr. Dobbin said. "It's being built with WiFi voice in mind."
Cheaper VoIP services offered by startups like Vonage and Skype, along with large cable operators, have already made a serious dent on the land-line phone sector. The country's four biggest carriers lost 538,000 residential phone lines last year, said RBC Dominion Securities Inc. analyst Jonathan Allen.
Some businesses are already using WiFi phones, but the impact VoIP could have on the wider wireless sector is far from certain in these early days.
The convergence of fixed and mobile networks would be a boon to handset makers as everyone would need a new wireless device. VoIP over wireless could also prove appealing for newer players, such as wireless companies that don't own their own networks, analysts say.
"It seems the introduction of converged services by incumbent carriers haven't got a lot of traction so far," said Merrill Lynch Canada analyst Glen Campbell. "The more interesting launches are by the non-incumbent carriers. New-entrant operators are looking to gain market share, so their incentives are quite different."
In France, for example, Iliad SA recently launched a modem that allows calls over Internet connections through WiFi-enabled cellphones. BT Group PLC, which doesn't have its own wireless network, introduced a service last year called Fusion that allows calls to be made on wireless networks when outside, and over the fixed network at home.
For established land-line and wireless carriers, there are both threats and opportunities, observers say. Wireless carriers wouldn't have to make a big investment to build out infrastructure to homes that don't receive a strong signal. Instead, consumers could make calls with their cellphones over a WiFi connection at home, which could lead to a pickup in wireless substitution. Moreover, it would cut the load on wireless infrastructure.
"The way [wireless] pricing plans are set up, I've got free weekend, weeknights" at a time when people are usually at home, says Tejas Rao, director of product and technology sales for Nokia Canada. "I'm using a mobile network when I'm not really mobile. The opportunity [for carriers] is to offload those calls to a cheaper network."
However, analysts also predict VoIP calls will put pressure on wireless prices. As for land-line operators, they would be hurt if more consumers dumped their land-line phones and just used wireless.
With all these question marks, it's not surprising the big players haven't made a bold move into this disruptive market yet.
"Regular cellular is just too much of a money maker for carriers to want to change that in a big way yet," said Jon Arnold of IP consultancy J Arnold & Associates.
"Only the paranoid survive," said Robert Blumenthal, Telus Corp.'s senior vice-president of products and services, who nevertheless estimates the impact will be "low" in the consumer market. "We're certainly paranoid about it.
"It comes down to the value proposition that they're bringing to the marketplace, [which] is not considerably differentiated," he added. "It's purely price, which is very easily matched not only between those new competitors, but even people who are incumbent providers."
There are wrinkles to iron out with WiFi calling, such as the fact it is on unlicensed wireless spectrum that other consumer devices use. WiFi networks also aren't available everywhere, he said.
Services that blend mobile and fixed networks will most likely be launched in 2007 and 2008, Mr. Campbell believes, although he added it's a matter of getting the product and timing right.
"A lot of new technologies hit the wall the first time they're deployed, and then years later they finally achieve success," Mr. Campbell said. "VoIP was like that."
