Wi-Fi phones make a splash

by Guest Contributor | Aug 05, 2004 2:04:00 PM

Takeaway: Roaming between wireless local area networks and cellular services may be closer--and pricier--than expected.

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By Ben Charny
Staff Writer, CNET News.com

Cell phone makers plan to release so-called Wi-Fi phones ahead of schedule, bringing new threats and opportunities to wireless carriers and traditional phone service providers.

The highly anticipated hybrid phones let people make connections using a local wireless Internet access point and seamlessly switch over to a cell phone network whenever necessary. The net result is greater flexibility in mobile communications as well as potential cost savings gained by shifting call minutes that would otherwise count against a cell phone plan onto the Internet.

New phones and handsets that promise to accomplish this feat are due later this year from Motorola, Hewlett-Packard and NEC. Each is different, but all combine into a single device three hot technologies that are transforming the telecommunications industry: high-speed Wi-Fi wireless networks, voice over Internet Protocol (VoIP) and wireless broadband.

"If you go into any major carrier in North America or Europe today, they are at the very least in the strategic planning phases of integrating Wi-Fi and cellular into a package," said Novatel Wireless Vice President Brad Weinert. "What's holding them back is the infrastructure to manage this on a large scale. But the operators are certainly driving in this direction quickly."

The marriage of short-range, high-speed Net access and cellular service brings together two technologies that have sprung up side by side, creating opportunities for both collaboration and competition. Cellular carriers have spent billions of dollars to upgrade their systems for high-speed data, or third-generation (3G), services. These offer wide coverage that exceeds Wi-Fi's short range, but bandwidth tops out at less than 500kbps (kilobits per second), and thus can't compare with wireless LAN (local area network) technology that blazes at speeds up to 54mbps (megabits per second).

Combining the ability to use both kinds of networks on a single device allows consumers to take advantage of the best each has to offer.

Hybrid handsets can use both data and voice applications, with most of the attention focused on data until recently. But that's changing, thanks to technology improvements for managing call transfers between Wi-Fi and cell phone networks and the increasing popularity of VoIP on corporate networks.

Early versions of Wi-Fi cell phones failed miserably because of the enormous drain on the batteries--which must support two chipsets rather than one--and because users were forced to manually switch between networks. But at least one phone maker, Motorola, now claims to have solved the automatic transfer problem. As a result, carriers are promising some dizzying scenarios by Christmas. For instance, a customer could start a call on an office Wi-Fi network, switch to a cell phone network as he or she travels outside the office building, then conclude the call on a home wireless network, all with no interruptions.

T-Mobile USA plans to offer a hybrid phone developed by Motorola, Avaya and Proxim, designed to allow someone to use the same phone to carry on the same conversation while traveling on the highway or sitting in an office cubicle. Meanwhile, Sprint may soon opt to distribute one of the phones. The company has already had some success selling a more cumbersome service that doesn't automatically toggle and which was created primarily for data transfer rather than voice sessions.

AT&T Wireless, Verizon Wireless and Sprint are also likely candidates. They are reselling access to a 3,300 hot-spot wide network owned and operated by Wayport. The hot-spot company two years ago signed roaming agreements with cell phone service providers "just in anticipation" of the debut of cell phones with Wi-Fi radios inside, said Wayport Vice President Dan Lowden.

Although carriers could wind up losing some revenue if Wi-Fi users shift a large number of minutes off their networks, some see the new phones as an opportunity to cement the cell phone as a true replacement for traditional wired phone service.

"I see an opportunity to attack the regional Bell operating companies," said Barry West, chief technology officer at Nextel Communications and an early fan of such hybrid phones.

The handoff
Motorola, in cooperation with Proxim and Avaya, has developed one of the most significant of the new hybrid phones. The phone, unlike those from competitors, switches automatically between cellular and wireless Internet networks.

While careful not to give up too many trade secrets, Chris White, Motorola's director of business development, said network software helps the cell phone sense when it's about to reach the end of Wi-Fi coverage. While the call is still traveling through the Wi-Fi network, the phone will register onto a cellular network, in essence creating a second phone line for the call.

The phone has been in the works since last year, when Motorola struck a deal to use chips from Texas Instruments designed for the purpose.

When the Wi-Fi signal degrades to a preset level, the call is bridged onto the cell connection through means that Motorola declined to discuss in detail.

The only thing a consumer will notice is the change in the quality of the caller's voice--for the better if the phone is switching to a Wi-Fi network and for the worse if it's hopping onto the cell phone network.

"What's happening here is we're setting up two different IP addresses for the same call, and that's something that's never been done before," White said.

Pocketbook panic
The handsets will be expensive and marketed primarily toward business customers, at least for now.

For instance, HP's 6315 iPaq, which switches between traditional cellular and Wi-Fi networks, costs $500, and that's with a $100 discount for signing a one-year contract with T-Mobile. The carrier will begin selling the device around Aug. 26.

That price is likely to be too high for most cell phone users, who are used to paying less than $50 for a color camera phone that might cost carriers $300.

Plus, wireless broadband would cost consumers between $40 and $80 a month, and unlimited access to a nationwide Wi-Fi hot-spot network would add another $20 to $40 a month.

"There are a lot of cost barriers," a Sprint representative said. "There aren't a lot of customers willing to pay what a carrier will be charging for things like an automatic handoff between networks."

Motorola has said its new hybrid phone will be used primarily by businesses. The handset maker chose to use the 802.11a Wi-Fi standard, which is found almost exclusively in offices, rather than the more widely used 802.11b or 802.11g standards.

"These phones are not in the consumer end of the business," Motorola's White said.

It could take up to two years before carriers focus their Wi-Fi phone efforts toward consumers, some experts believe.

"Most carriers haven't evolved the business model for consumers," said Mack Weatherby, marketing alliances director at Avaya. "But there will be more carriers selling to consumers."

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