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Internet Muscles In on Cell Phone Turf

Skype plans to grow its mobile voice over Internet protocol phone offerings



Courtesy of iStockphoto, Copyright: Manuela Krause

Having emerged as a popular technology for making phone calls—often free of charge—via one's PC, voice over Internet protocol (VoIP) is set to stake its claim on the mobile market. Mobile VoIP may not replace cell phones in the immediate future, but it will give callers the ability to bypass cellular networks wherever they have access to a Wi-Fi network.

Luxembourg-based Skype, Ltd., a division of online auctioneer eBay, has been pushing over the past year to deliver more of its VoIP services to mobile callers through a partnership with wireless network equipment maker NETGEAR, Inc. A year ago, the two companies teamed up to offer the Skype Wi-Fi mobile phone, which lets callers make free Internet calls to anyone who also has a Skype account and access to a Wi-Fi wireless Internet connection. The phone does not require a cellular network but it must be within range of a Wi-Fi access point to operate.

Skype is now reportedly planning to expand mobile VoIP technology through a partnership with Hutchison 3G UK, headquartered in London and more commonly known simply as 3. A Skype spokesperson confirmed that the company is "working with 3 to make Skype completely mobile," but refused to give details of the deal.

Mobile VoIP phones have thus far made sense in relatively stationary wireless environments, such as homes, offices or Internet cafés. The emergence of mobile VoIP phones changes the dynamic in the communications-provider market, taking away some of the cell phone carriers' power to charge by the minute. Still, mobile VoIP phones are not in a position to render cell phones obsolete, particularly because Wi-Fi signals cannot provide outdoor coverage as well as powerful cell towers do.

There are cordless phones that offer dual access to phone and Ethernet lines, but Skype's model poses the greatest threat to phone carriers such as Verizon and Sprint. This is because it takes customers completely away from using cell networks, which bring in a substantial chunk of carriers' profits. "Skype is the most disruptive model for the carriers," says Bill Kish, chief technical officer and co-founder of Ruckus Wireless, a Wi-Fi hardware and software maker in Sunnyvale, Calif.

The emergence of sophisticated mobile devices such as Apple's iPhone will further drive the demand for more comprehensive Wi-Fi coverage. "The iPhone has a proper browser, but you don't want to be surfing over a cellular network," Kish says. "Wi-Fi was designed from the start to handle data, whereas cellular networks were built for voice."

Some carriers have begun to recognize the disruptive nature of mobile VoIP. In late June, T-Mobile USA launched its HotSpot @Home service that works with new Samsung and Nokia mobile phones to let customers use a single phone for both Wi-Fi and cellular calls. This allows T-Mobile HotSpot @Home customers to switch to the company's cellular network when they leave the range of their home Wi-Fi hookup.

The price is right, says Michael Gartenberg, a wireless technology analyst for JupiterResearch, although he notes that ultimately it comes down to service and quality: "If you can't hear the other person," he says, "it doesn't matter how cheap it is."

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