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Last Updated: Thursday, 16 June 2005, 08:13 GMT 09:13 UK
Cheaper mobile calls on the way?
By Jane Wakefield
BBC News technology reporter

BT executive shows off BT Fusion handset
BT is determined to get a share of mobile market
BT's Fusion service offers users the chance to ditch their fixed line phone in favour of one handset, which in turn means one bill and one number for all calls.

Some see it the beginning of the traditional telco fightback against loss of revenue to mobile operators.

Others think it is too little too late, given the advances of broadband telephony services, such as Skype.

The system means calls made from home will be treated as fixed-line calls and charged at a cheaper rate.

Mobile calls made outside the home will be charged on a monthly basis. For 9.99 callers will get 100 talk-time minutes and 14.99 will provide 200.

But anyone hoping a mobile call will automatically switch to the cheaper tariff if they get home mid-call will be disappointed. The charge will be based on where the call originated.

"The flipside of this is that people engaged on call at home, who fancy wandering down to the park in the middle of it will be able to take advantage of the cheaper tariff," said a spokesman for BT.

If successful, the Fusion service could force mobile operators to respond with their own tariffs for home use, said Thomas Husson, a mobile analyst at Jupiter Research.

It is estimated that between 30 to 40% of mobile calls are made from the home or the office, representing a substantial part of mobile operators' revenues.

Losing revenue

"Services like BT Fusion are a threat for mobile operators and, in answer to BT, we could see more home zone tariffs offered by them," said Mr Husson.

For its part, Vodafone has partnered with BT to provide the mobile network for Fusion, taking a share of the revenues generated.

In Europe mobile operators are already creating services to bridge both the mobile and fixed line worlds.

O2's subsidiary in Germany offers a hybrid mobile/fixed line service which offers customers a cheaper tariff for calls made from home.

It can identify where calls are coming from using location-based technology.

Motorola's handset for the BT Fusion service
The Fusion handset will be focused on voice services

Increasingly fixed operators have been losing revenue to mobile firms and all eyes will be on BT over the next few months, said Ovum analyst Angel Dobardziev.

Describing the move as "a highly significant development" it could signal a series of similar trials around the world, she said.

How the phone works, whether BT has reliably solved the technical challenges and how it is priced will be closely watched by the Fixed Mobile Convergence (FMC) Alliance.

The group was formed in July of last year, partly in response to the loss of revenue fixed operators were experiencing.

Of its 18 members, some have already launched dual mode phones but BT is the first to create a device that switches between mobile and home environments during a call.

Stiff competition

BT is hoping the service will breath new life into its retail broadband offering, which has faced stiff competition from providers such as Wanadoo and AOL.

If the solution works flawlessly and take up accelerates we will see a mad scramble by peers to copy it, and mobile operators to counter it
Angel Dobardziev

Users to these rival services will not be able to take advantage of Fusion, despite the fact that most alternative ADSL services in the UK run on BT's network.

A spokesman for BT admitted it was technically possible to hook up people from other ISPs and said it was something the firm may consider down the line.

Many of its rivals already offer, or are about to offer, their own telephony packages.

The service also faces stiff competition from VoIP (voice-over IP), a service that allows users to make cheap phone calls over the net.

Some critics say the Fusion project is jumping on the broadband telephony broadband a little too late.

Originally dubbed Project Bluephone, the Fusion service has been subject to several technical delays already and there could still be technical hurdles to overcome.

The fact that calls made from home will not run over the traditional phone network but through an ADSL connection, could reduce the quality of the call, said Ms Dobardziev.

The service will also be a test of Bluetooth technology although it is likely that BT and any other fixed telephony operators offering similar services will eventually switch to wi-fi enabled phones as the price of the handsets falls.

"If the solution works flawlessly and take up accelerates we will see a mad scramble by peers to copy it, and mobile operators to counter it," said Ms Dobardziev.

"If it fails, it may significantly dampen the FMC appetite among operators for another five years."

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