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NEW ORLEANS - Cell phones and Internet-based calling revolutionized the traditional phone call. WiFi cut the Internet's cord.

Now the three technologies are coming together, changing the rules of business communication and aiming at consumer wireless services and devices.
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Cellular companies have taken notice and are moving to adopt the technology to expand their own offerings and keep an eye on a potential competitor, particularly for business customers.

"We're really at the pioneer stage," said Frank Hanzlik, managing director of the Wi-Fi(cq) Alliance, an Austin-based trade group whose members include Dell, Intel, Microsoft and Texas Instruments.

"The carriers are recognizing that voice over IP isn't going away and WiFi and hot spots are not going away," he said. "We're seeing a lot more awareness that WiFi and cellular together are really offering a very powerful combination."

That combination was an undercurrent running throughout CTIA Wireless 2005, the annual wireless industry convention held here last week by the Cellular Telecommunications and Internet Association.

At the show, many new "smart phones" _ cell phones with computer functions _ included WiFi for to allow e-mail and Web surfing. At least one handset was specifically geared toward allowing voice calls to roam between cellular and wireless Internet networks.

"You can start thinking about single phone number across anything that you do, with maybe charges that aren't so significant," said Ellen Daley, a Forrester Research analyst who focuses on the new calling technology. "The carrier fear is that now people roam into those WiFi spots, which they may or may not own, and suddenly they're not getting cellular charges."

The new technology goes by the unwieldy name Voice over WiFi, or VoWiFi _ a mashed acronym formed from Voice over Internet Protocol, or VoIP, and the Wireless Fidelity standard for high-speed Web access that creates local networks in homes and businesses.

Voice over IP offers a lower-cost alternative to traditional local and long-distance service by converting voices into data that speeds over the Internet. For callers, the experience is typically no different from a traditional phone call except for added features such as voice mail delivered to an e-mail inbox.

Spurred by start-up firms like New Jersey-based Vonage and competition among major cable and telephone companies, the wired version of the technology has come into the consumer mainstream in the last couple of years.

However, with more than 1 million users, VoIP accounts for only a tiny fraction of the 150 million traditional U.S. phone lines.

Internet-based calling has made its most significant inroads among businesses, and the fact that many companies already have WiFi office networks should help the wireless version take off.

Industries that are particularly interested include large retail chains, insurance companies with branch offices, and health care, where medical staff can communicate over hospital networks, Daley said.

"It replaces your desk phone," she said. "You can have a single phone number no matter where you walk in the business."

Merging a WiFi and cellular phone means that number can range beyond the office.

Motorola's CN620 handset is the first that can roam between an office WiFi network and the type of cellular system used by Cingular Wireless and T-Mobile. The carrier involved hasn't been named publicly.

The phone, now in early trials, is available only through New Jersey-based Avaya Inc., said David LeClair, the firm's director of technology partnerships. Avaya, which provides communications services for most Fortune 500 companies, has deployed more than 5 million Internet-based business phone numbers and has offered voice over WiFi with WiFi-only handsets for a few years.

Consumer use of the technology faces more hurdles.

The number of WiFi hot spots _ more than 60,000 in 98 countries _ is increasing rapidly, according to JiWire, a company that monitors WiFi locations.

However, compared to cellular networks, WiFi coverage is scarce and has far less range.

Still, wireless Internet calling is available to some consumers. Free software and programs from companies like Vonage can transform a PDA with WiFi into a makeshift phone. Vonage also plans to offer a dedicated WiFi phone by summer that lets its subscribers make wireless Internet calls.

"If you're in the campus environment or (another) hot spot, you would have the ability to use the voice over IP over WiFi capabilities to very cost-effectively make calls literally anywhere in the world," Hanzlik said.

But "WiFi is never going to be everywhere cellular is, and cellular is never going to be as fast as WiFi," he said. "So you really want both."

Wireless carriers already are trying to compete on the wireless Internet front by rolling out higher-speed networks and offering services such as music downloads and video on cell phones.

One benefit to carriers in bringing cellular and WiFi together would be shifting the burden in busy communications areas away from strained cellular networks.

"Everyone is talking about the WiFi solution," said Kirk Parsons, a senior wireless analyst with J.D. Power and Associates. "Instead of building another tower, they can use an existing frequency to tap into and maybe offer some additional services."

But he said voice over WiFi is unlikely to go far as a standalone product and will be swallowed up by cellular service.

As the technology spreads, a regulatory fight is likely as government officials ponder where wireless Internet calling fits in the framework of fees and taxes.

The Federal Communications Commission approved a Vonage petition in November declaring voice over IP an interstate service exempt from state regulation, but several states appealed the decision.

Other challenges for voice over WiFi include the merging of technologies in a single device, coming up with industry standards to govern the roaming to cellular networks and a way to charge for both types of calls.

Industry officials and analysts agree that the ultimate goal for merging WiFi and cellular is a seamless experience for consumers, who would roam to the best network automatically to save money or get faster speeds.

Carriers are already bringing networks together.

Cingular Wireless, owned by BellSouth and SBC Communications, announced at the convention that subscribers to its EDGE data service, who typically go online with laptops using modem cards, can now pay to roam to nearly 4,000 WiFi hot spots, including those of SBC, Atlanta-based StayOnline and Austin-based Wayport Inc.

"We're giving customers a single solution for high-speed data access without having to search out specific locations," said Abhi Ingle, executive director of Cingular's business markets group.

While voice over WiFi and cellular are widely viewed as complementary rather than competitive, several developments could put the two at odds.

A handful of cities have blanketed themselves with WiFi, and more are on the way. In such places, a WiFi phone could conceivably work everywhere outdoors without the need for a cellular network.

A network covering Rio Rancho, N.M., that went online earlier this year, includes a citywide wireless voice over IP service that launches commercially next month, said Tyler van Houwelingen, chief executive and founder of Ottawa Wireless Inc., which deployed the service. Speaking at the CTIA convention's "WiFi VoIP Summit," he said his company is the first to roll out VoWiFi citywide.

In the largest planned municipal project, Philadelphia is working to transform its 135 square miles into the world's largest WiFi hot spot.

Sensing a threat, cable and phone companies that provide broadband Internet have pushed for laws to block competitive services from local governments, which they say have unfair advantages.

On the technical side, the technology called WiMax looms large in the future.

WiMax, which can send a broadband Internet signal up to 30 miles, is still quite new and is used primarily by businesses seeking an alternative to wired high-speed connections such as cable modems and phone company digital subscriber lines, or DSL. WiMax also is useful for bridging WiFi hot spots and bringing the Internet to remote areas beyond the reach of wired lines.

A version of WiMax intended for mobile use is several years away, but could become a competitor to the new generation of cellular service that offers broadband speeds, Hanzlik said. "The market will decide this, that or both," he said.

On the Web:

CTIA convention: www.ctiawireless.com

Wi-Fi Alliance: www.wi-fi.org

Motorola WiFi cell phone: www.Motorola.com/wlan/solution_cn620.html

Avaya: www.avaya.com

Copyright © 2005. Forbes / Cox News Service

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