TELECOM Digest OnLine - Sorted: The Mobile Snatchers

The Mobile Snatchers

Mark Halper (
Sun, 4 Sep 2005 21:17:10 -0500

By Mark Halper

Wi-fi changed the way the world surfs the web. Now it's coming to a
phone near you -- and telecoms will never be the same.

When operations manager Spiros Stefanou learns that a flight coming
into Athens International Airport is due in early, he picks up his
mobile phone and alerts baggage handlers to scramble a crew
quickly. Nothing unusual about that -- except that the Cisco-supplied
handset that Stefanou and some 100 other airport employees use never
touches a mobile network. Instead, it wirelessly taps into the
airport's internal network, which transmits the call for free anywhere
in the 16-sq-km airport. "It bypasses any mobile or telecom network,"
says Fotis Karonis, the airport's director of information technology
and telecommunications. "It's an advantage, because you don't have to
call with your mobile and pay." Using this system helps save airport
workers as much as $163,000 per year.

It might seem like little more than the reinvention of the
walkie-talkie, but Stefanou and Karonis are on the cusp of a movement
that could be called The Invasion of the Mobile Snatchers. Ever since
the beginning of commercial cell-phone services some two decades ago,
mobile phones and mobile operators have gone together like railroad
cars and railroad tracks. Handset vendors such as Nokia and Motorola
provided about 2 billion phones to mobile operators like Vodafone,
Orange and Verizon, which in turn put them in the hands of consumers
who pay to transmit calls over the operators' mobile networks. Indeed,
many operators subsidized the handset business, picking up the cost of
the phones as a loss leader that would be more than made up by
charging consumers for use.

But after all that cooperation, something radical is happening. Handset
vendors are starting to build Internet technologies into their phones
that permit users like Stefanou to bypass mobile networks. The same
wi-fi chips that have worked their way into laptops and turned tens of
thousands of coffee shops and hotel lounges into Internet surfing
zones are starting to appear in handsets. Customers using this phone
simply place a call as normal, provided they have access to a wi-fi

This lets them do an end run around the mobile network. The lines
between Internet service and phone service are blurring, and just as
voice over Internet Protocol (VoIP) has shaken up the fixed-line phone
business, it is now poised to disrupt the mobile business. At stake
is a slice of the $550 billion in voice revenue that London research
firm Informa Telecoms & Media says mobile operators will generate in
2010. The revelation in August that Google will begin providing free
voice transmissions over computers, and Microsoft's announced
acquisition last week of the VoIP start-up Teleo, show that the
biggest tech players are not going to sit this game out.

For some companies, that will be liberating. "Making calls from a
mobile handset is no longer the preserve of just the mobile operator,"
says Ryan Jarvis, head of convergence products for British mobile and
fixed-line provider BT. Because BT only recently entered into the
mobile-service business, it has been among the first of the old-line
telecoms to cautiously embrace mobile VoIP. Since June, BT has started
400 of its home broadband customers on Fusion, a Motorola-supplied
phone that makes cheap Internet Protocol (IP) calls from home and
switches to pricier mobile transmission outside the house. It's still
a fledgling technology, because the phones use Bluetooth to make an IP
connection, which limits the range in which supercheap calls can be

But things should get more interesting in 2006, when BT and other
providers add hybrid wi-fi/cellular phones. At least four of the
largest mobile-handset vendors -- Nokia, Motorola, Samsung and LG --
are known to be preparing such devices, which will bring wi-fi phoning
more into the mainstream. "2006 will be a big year for [mobile]
wi-fi," pred icts Nokia senior vice president Ilkka Raiskinen, noting
that wi-fi will become a standard feature in Nokia's multimedia and
business phones next year, and that by 2006 Nokia will put it into
many midrange models (it currently offers wi-fi only in an $800 phone
called the 9500 Communicator).

At handset maker Motorola, chief strategy officer Richard Nottenberg
echoes Nokia's views, and pledges that Motorola will next year
introduce a "significant" number of wi-fi phones. Indeed, Motorola has
made a deal with the company that many phone firms associate with the
Devil; its mix of products next year is expected to include a phone
loaded with software from Luxembourg-based VoIP firm Skype, whose
users can make free VoIP calls to each other. Skype has signed up 51
million "registered" users of its software, though probably less than
half of those actually use it. Many Skype users call from their PCs,
laptops and handheld devices via fixed or wi-fi-accessed broadband
lines. "Five years from now, most calls, everywhere in the world, will
be routed over the Internet, [via] affordable, cell-phone-like
products that are Skype- and Internet-enabled," predicts Skype ceo
Niklas Zennström.

In these early days of mobile VoIP, analysts find it difficult to
quantify its potential impact. But many expect a shakeup. "Can
carriers, either wireless or wireline, prevent its spread? The answer
is no,'' says Allen Nogee of research firm In-Stat. The company
forecasts that global shipments of mobile phones with wi-fi will hit
13.5 million in 2007, leap to 52.8 million in 2008, and surge to 136
million by 2010 -- probably a conservative estimate. And it's not just
voice calls that are under threat. As phones morph into data and
entertainment devices, wi-fi chips will also permit phone users to
browse the Web and download music without coming near a mobile

Nokia, for instance, is building wi-fi into its N91, a slick,
music-playing phone capable of storing 3,000 songs, due by the end of
the year. Wi-fi and other Net connections also threaten operators'
profitable text-messaging business, because users can send IP-based
"instant messages" instead. Of course, mobile operators will not sit
idly by. Some will point out that wi-fi phones have short battery life
and poor wandering capabilities. Mobile operators are also requesting
that handset makers like Nokia and Motorola build into their hybrid
phones a technology that will route wi-fi-initiated calls over mobile
networks. And then there's the ultimate weapon: price cuts, which
could make the underlying technology irrelevant. "At the end of the
day, it's a pricing game," notes Gartner analyst Martin Gutberlet in
Munich. Many mobile operators, for example, now provide virtually free
intra-office calls. This fall, several will offer free calls that stay
on the operator's own network within a country, says Gutberlet.

But eventually, most operators will be forced to join the VoIP
revolution. Some already run wi-fi hot spots; in France, Orange
subscribers can tap the Net with laptops and other devices, so adding
VoIP phones to its portfolio could help the company hold onto at least
some voice revenue. Germany's third largest operator, E-Plus, last
week said that it will include Skype software as part of its flat-rate
40-per-month data-card subscription for use on laptops, starting in
October. "In the long term, as part of an evolution, we'll go to
VoIP-enabled over the phone," concedes Dave Williams, chief technology
officer at O2. Like the planes in Athens, mobile VoIP looks set to
take off, and woe to any carrier that stays on the runway.

Copyright 2005 TIME Magazine.

NOTE: For more telecom/internet/networking/computer news from the
daily media, check out our feature 'Telecom Digest Extra' each day at . Hundreds of new
articles daily.

*** FAIR USE NOTICE. This message contains copyrighted material the
use of which has not been specifically authorized by the copyright
owner. This Internet discussion group is making it available without
profit to group members who have expressed a prior interest in
receiving the included information in their efforts to advance the
understanding of literary, educational, political, and economic
issues, for non-profit research and educational purposes only. I
believe that this constitutes a 'fair use' of the copyrighted material
as provided for in section 107 of the U.S. Copyright Law. If you wish
to use this copyrighted material for purposes of your own that go
beyond 'fair use,' you must obtain permission from the copyright
owner, in this instance, TIME Magazine.

For more information go to:

Post Followup Article Use your browser's quoting feature to quote article into reply
Go to Next message: John Hines: "Re: Flood Relief Efforts - Unfair Criticism?"
Go to Previous message: Janice Morse: "Congress Weighing Rules for Cable Franchises"
TELECOM Digest: Home Page