Free cellphone calls too? Just wait..

The Wi-Fi in Your Handset
Illustration by The New York Times

By MATT RICHTEL
Published: July 29, 2006

Graphic: One Phone, Two Ways to Connect

What if, instead of burning up minutes on your cellphone plan, you could make free or cheap calls over the wireless networks that allow Internet access in many coffee shops, airports and homes?

New phones coming on the market will allow just that.

Instead of relying on standard cellphone networks, the phones will make use of the anarchic global patchwork of so-called Wi-Fi hotspots. Other models will be able to switch easily between the two modes.

The phones, while a potential money-saver for consumers, could cause big problems for cellphone companies. They have invested billions in their nationwide networks of cell towers, and they could find that customers are bypassing them in favor of Wi-Fi connections. The struggling Bell operating companies could also suffer if the new phones accelerate the trend toward cheap Internet-based calling, reducing the need for a standard phone line in homes with wireless networks.

The spottiness of wireless Internet coverage means that for now, the phones will be more of a supplement to, rather than a replacement for, standard cellphone service. But dozens of American cities and towns are either building or considering wide-area wireless networks that would allow Wi-Fi phones to connect and make free or cheap calls.

“It’s a phone that looks, feels and acts like a cell phone, but it actually operates over the Wi-Fi network,” said Steve Howe, vice president of voice for EarthLink, which is building networks in Philadelphia and Anaheim, Calif.

Later this year it plans to introduce Wi-Fi phone service that Mr. Howe said could cost a fifth as much as traditional cell service.

The technology is in its early stages, and it faces some hurdles to widespread use. But it is being promoted by big technology companies like Cisco Systems and giving rise to new competition in the mobile phone business.

A handful of companies are already using Wi-Fi phones to cut costs within offices or on corporate campuses, and the phones will soon be reaching the consumer market.

Skype, the Internet calling service owned by eBay, said last week that four manufacturers plan to begin shipping Wi-Fi phones that are compatible with the service by the end of September. Among them is Netgear, a maker of networking equipment, which plans to charge $300 for its phone; the other makers include Belkin, Edge-Core and SMC.

Skype allows free calls to other Skype users and usually charges pennies a minute for calls to regular phones, although it has made all domestic calls free through the end of the year.

EarthLink plans to sell phones for $50 to $100, then charge roughly $25 a month for unlimited calling. Initially, the service will work only with hotspots where Internet access is provided by EarthLink, either in homes or on its citywide networks.

The major cellphone companies have taken notice of Wi-Fi phones, and some have chosen to deal with the potential threat by embracing it, building it into their business plans.

Cingular Wireless plans to introduce phones next year that will allow people to connect at home through their own wireless networks but switch to cell towers when out and about.

Later this year, T-Mobile plans to test a service that will allow its subscribers to switch seamlessly between connections to cellular towers and Wi-Fi hotspots, including those in homes and the more than 7,000 it controls in Starbucks outlets, airports and other locations, according to analysts with knowledge of the plans. The company hopes that moving mobile phone traffic off its network will allow it to offer cheaper service and steal customers from cell competitors and landline phone companies like AT&T.

“T-Mobile is interested in the replacement or displacement of landline minutes,” said Mark Bolger, director of marketing for T-Mobile. Wi-Fi calling “is one of the technologies that will help us deliver on that promise.”

Major phone manufacturers including Nokia, Samsung and Motorola are offering or plan to introduce phones designed for use on both traditional cell and Wi-Fi networks. Samsung said last week that it had begun to sell its dual-mode phone in Italy.

Wi-Fi not only has the potential to offer better voice quality than traditional cellular service, but it also opens the door to videoconferencing and other data services on mobile devices. Cellphone users are now often limited to the services offered by their carriers, but Wi-Fi phones could have access to a wider range of offerings on the Internet, in some cases at faster transmission speeds than on the carriers’ networks.

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But there are enough limits to the technology that it may be some time before people start tossing out their old cellphones to take advantage of Wi-Fi.

The radio signals sent from standard mobile phones connect to tens of thousands of cell sites on towers or attached to buildings, billboards and other structures. These cells have an average range of two miles, allowing them to blanket much of the country.


Wi-Fi hotspots have a much more limited range, usually no more than 800 feet. Unlike the cellphone towers, which are operated by the carriers, the hotspots tend to be controlled by individuals or smaller companies, and are not coordinated or organized into a larger network.
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Graphic: One Phone, Two Ways to Connect

“It’s going to be a long time before you’ll have a reliable Wi-Fi connection anywhere you go,” said Michael Jackson, director of operations for Skype.

A company called Fon, which is based in Spain and is backed by Skype and Google, is trying to accelerate the spread of Wi-Fi by selling cheap wireless routers to anyone who will agree to let other people in the vicinity use them by paying an access fee. The buyers can choose to split the fee with the company.

In October, Fon plans to begin charging about $150 for a wireless router that also serves as a docking station for a Skype-compatible Wi-Fi phone. The phone will connect easily to hotspots operated by Fon members.

“Wireless Internet infrastructure can be incredibly inexpensive,” said Martin Varsavsky, the founder and chief executive of Fon.

Without special software, like that from Fon, however, hotspots may not automatically set up a connection with the new phones. Instead, until the technology is smoothed out, users might have to configure their phones to connect whenever they are in range of a new hotspot.

“If it takes you five minutes to set up at the airport and you save 50 cents, why would you bother?” said Benoit Schillings, chief technology officer of Trolltech, an Oslo company developing software to make these connections easier.

Another wrinkle is that Wi-Fi networks operate over unlicensed radio spectrum. This spectrum is essentially public space, which means that anyone can make use of it, but it also means that the frequencies can be congested, potentially causing interference and dropped calls.

By contrast, the major cellphone carriers paid billions of dollars to the federal government for the right to use their slices of the radio spectrum. They can control who is on their networks, maintain quality standards and limit overcrowding. But the spectrum fees introduce a layer of costs that Wi-Fi calls are not burdened with.

Companies including Clearwire, founded by the cellphone pioneer Craig O. McCaw, are building subscribers-only wireless data networks using a technology called WiMax that has a much greater reach than Wi-Fi, and mobile phone service is part of their plans.

The hotspot technology has inspired a vigorous and complex discussion in the telecommunications world about how the traditional companies should react.

On its face, the technology would seem to present the carriers with a major problem. The more time subscribers spend connected to Wi-Fi hotspots, the less time and money they spend on the cell network.

Yet carriers also recognize that per-minute charges are falling across the industry, and that the loss of revenue they suffer if they allow people to switch onto a Wi-Fi network could be offset by attracting loyal subscribers who sometimes want to connect that way.

Further, some carriers argue that if people connect to Wi-Fi in their homes and offices, where there are close and reliable hotspots, they will enjoy connections that are better than those via cell towers and will not need standard phone lines. In a home, for example, the mobile phone could connect as effectively through Wi-Fi as traditional cordless phones do now to their base stations.

Larry Lang, general manager of the mobile wireless group at Cisco, said Wi-Fi would allow good service in people’s homes “without having to put up big cellphone towers in the neighborhood.” Cisco makes equipment that phone companies use to handle digitized calls.

Roger Entner, a telecommunications industry analyst with Ovum Research, said some carriers were still wary of Wi-Fi service. He said they were concerned that when hotspot reception was not good — whether at home or elsewhere — they would be blamed.

“The guys who don’t want it are predominately Verizon Wireless,” Mr. Entner said. They do not want a customer who is getting poor service at a hotspot “complaining that Verizon service is responsible,” he said.

A spokesman for Verizon Wireless, Jeff Nelson, said the company was looking at Wi-Fi service but had no plans to offer a product in this area. “At this point, we don’t see a great application for customers,” he said.

Further complicating the business discussion for the carriers are the incestuous ownership arrangements in the telecommunications world. For instance, Cingular Wireless is owned jointly by AT&T and BellSouth, while Verizon Wireless is part owned by Verizon Communications, the regional phone giant.

BellSouth, AT&T and Verizon Communications each have an interest in selling high-speed Internet access for homes and offices. If consumers have an incentive to set up wireless networks in their homes — networks that could be used for superior phone service — it could give them another reason to buy high-speed Internet access.

Of course, as many laptop users have discovered, Wi-Fi Internet access is not always something you pay for. Sometimes it is something you just find, as can be the case when people deliberately or unintentionally leave access points open and unsecured. The phones that work with Skype, and most likely others, will turn the free access point in a neighborhood café — or a neighbor’s house — into a miniature provider of phone service.

“It can be very open, decentralized,” said Mr. Entner of Ovum Research. But, he said, such a grass-roots infrastructure presents many challenges. For example, callers could get frustrated when the hotspot they are relying on for a connection stops working and there is no one to complain to.

Mr. Entner said, “You could knock on your neighbor’s door and say, ‘By the way, buddy, I’ve been bumming your Wi-Fi signal to make calls; please turn it back on.’ ”