VoIP Goes Mobile

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Truphone Meets Nokia

Wireless VoIP services vary widely in how they work. Some, including Jajah, can be used with a basic cell phone and require that users call a local number that connects them to the service that routes a call overseas. Others are more involved, requiring that the user download software onto an Internet-enabled cell phone. In some cases, calls must be placed via WiFi network. What the services have in common, though, is that each helps wireless users circumvent at least some of the charges associated with long-distance wireless calling.

As complicated as wireless VoIP services may sound, they've come a long way. Until recently many phones couldn't gain access the Web via WiFi networks. Others couldn't download the necessary software. But the number of WiFi phones sold globally is expected to grow to 33% of the total by 2011, from 5.5% this year, according to research firm Gartner (IT). Smart phones such as Apple's (AAPL) iPhone and Research In Motion's (RIMM) BlackBerry, which provide advanced Web services, are gaining in popularity too.

Indeed, many downloadable wireless VoIP applications are being offered through Apple's iPhone App Store. Truphone is one such tool. When used on Nokia (NOK) e61 and Nokia n95 smart phones, the British-developed service lets users make calls for a few cents a minute using a data plan rather than wireless voice minutes. Calls to other Truphone customers using Nokia N-series or E-series devices are free. So in theory, a user could save money by purchasing an unlimited data plan in tandem with the lowest-priced voice plan necessary. "Web calling will put price pressure on the incumbents," says Truphone CEO James Tagg. AT&T declined to comment for this story. Verizon Wireless, the No. 2 U.S. mobile-phone company, didn't respond to requests for comment.

Restrictions on VoIP Usage

Many handset makers limit VoIP usage on their devices. Apple, for instance, prohibits software developers from enabling VoIP calls over cellular networks—though applications that route these calls via WiFi are allowed. "I don't think carriers are going to let VoIP to take as much revenue [as it's taken from residential phone providers]," says Rebecca Swensen, an analyst at consultancy IDC (IDC). Case in point: T-Mobile USA, which has tweaked its handsets so that even calls made via WiFi hotspots count against subscribers' wireless minutes, unless the users sign up for an additional calling plan, costing $10 a month (BusinessWeek, 6/25/09).

Yet in a bid to stay competitive, some telecom providers are considering offering free VoIP calls within certain applications. A company called Global IP Solutions, which licenses mobile VoIP technology, is in talks with several second-tier wireless carriers in the U.S. to enable free Web calls on certain applications, such as interactive wireless gaming. "Laws of competition are starting to drive this," says GIPS CEO Emerick Woods. He declined to identify any of the carriers.

Some carriers abroad already offer free VoIP calls to users within certain social networks. In late August carrier 3, which is owned by Hutchison Whampoa and offers wireless service in countries including Britain and Italy, will begin selling a new version of its popular Skypephone that lets users make free calls to Skype contacts without using voice minutes.

Skype Out Calling

Later this year, Skype will launch its Skype Out service, letting 3's Skype customers make calls to home and wireless phone numbers of non-Skype users. "I think we are seeing a real change in operator approaches to Skype," explains Tony Saigh, who heads business development for mobile at Skype. "There's a realization that providing customers with additional modes of communications is good. The real battle is how do you keep your customers engaged."

Business Exchange related topics:
VoIP (Voice over IP)
Wireless Communication
Wireless Broadband
Mobile Data Services
Mobile Industry

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.