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Last Updated: Friday, 18 May 2007, 07:36 GMT 08:36 UK
Wi-fi signals big change for mobiles
By Mark Ward
Technology Correspondent, BBC News website

Wi-fi in cafe, AP
Wi-fi is becoming much easier to find and use
When mobile phone firms paid billions for a licence to run a third-generation (3G) network in 2000, they could console themselves with the knowledge that the network was theirs and theirs alone.

In the UK the auction of those 3G licences raised 22.47bn and, at a stroke, gave the winners of the licences a de facto monopoly on futuristic phone services.

To offset the high cost of buying a licence and building the network, operators knew that, for the 20-year term of that licence, they had control over any and every customer they could persuade to sign up.

As the numbers turning to 3G are climbing, those mobile networks could be forgiven for thinking that it was only a matter of time before they started recouping the considerable capital cost of buying and building that network.

Lost signal

Unfortunately the relentless pace of innovation may be about to dent the dreams of recovering those costs.

"There's a lot of wi-fi around," said James Tagg, founder of Truphone, which lets people makes calls via wi-fi using voice over internet protocol (Voip).

"There are two to three million hotspots in the UK and there's almost no office that does not have one," he said.

For Truphone and the other four firms that have a licence to offer mobile calls via wi-fi in the UK, that growth means that they do not have the job of building and paying for a national network to carry their calls.

"Instead," said Mr Tagg, "municipal governments are doing it for us."

As hotspots get linked up into mesh networks that offer blanket coverage they create a rival to the 3G networks currently in existence.

N95 menu, Nokia
Some owners of wi-fi capable phones have found some features blocked
Because there was no huge outlay of cash to buy the base stations and install them the operators aiming to use wi-fi have a much lower starting point for call costs. They also route the calls over the net which helps cut prices for certain calls.

"Mobile operators are very good at secluding the market for themselves," said Zayera Khan, a customer experience analyst at Forrester who has studied the mobile Voip market. "But these firms could rumble it up a bit."

"In the US and Europe people are used to using their mobile and for Voip the next logical step would be to go in that direction," she said.

Fight back

However, warns Ms Khan, the wi-fi operators do not have everything in their favour.

To begin with, she said, the technology to set up and use Voip via a mobile can be tricky and handsets that use wi-fi are expensive and hard to find.

She added that it was not just low call costs that would make people use wi-fi for their mobile calls but additional services too.

Presence, which lets people know when friends are online, combined with instant messaging or social network type services could prove a draw, she said.

Evidence also suggests that, at the moment, Voip on mobiles, be it via wi-fi or not, are not having an impact on mobile operators.

Departure board, PA
Many people use the net to slash international call costs
"Our users make calls that they would not normally do or do more of them or make longer calls," said Roman Scharf, founder of Voip firm Jajah.

Many of Jajah's users make international calls that would be simply too expensive via a mobile.

"They find it convenient, they save a lot of money and then they make lots more calls," he said.

So far, he said, users are not turning to Voip for the bulk of their day-to-day calls.

Evidence to back this comes from an analysis of how traffic is growing on Skype.

According to analyst firm Telegeography, in 2006 Skype users are expected to make 13.8 billion call minutes - 80% up from 2005.

However, traffic on traditional phone lines is expected to grow over the same period to 237 billion minutes.

But, said Ms Khan from Forrester, the new entrants were not going to have everything their way.

Established mobile operators, she said, were unlikely to let new operators cherry pick customers. Instead, she said, they could profile customers and target those most likely to use Voip via wi-fi with their own-brand services.

Some are also blocking some features on phones like Nokia's N95 which let people use wi-fi and voip services.

Mr Tagg from Truphone described this as "frustrating" and added: "If they opened up their networks it would definitely be good for the consumer and probably for the operators too."

"But," he added, "it's a risk and it's a scary thing for an operator to do."

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