Wi-Fi networks could be next cost-saving telecom move

By ELLEN SIMON

The Associated Press

Now that some Wi-Fi «hot spots» have grown into broader neighborhood «hot zones,» the next wave is waiting.

Coming soon: phones and gear that send conversations over wireless Internet networks — for free or at a fraction of the cost of traditional calls.

Mobile phone maker Motorola Inc. has a device that would seamlessly switch calls from cellular networks to cheaper Wi-Fi networks wherever they are available. Discount carrier IDT Corp. is testing consumer Wi-Fi phone service in Newark, N.J.

If successful, Wi-Fi calling would be one more factor decreasing calling costs and shrinking revenue at traditional carriers.

«The potential is enormous as an alternative to conventional telephony,» said John Jackson, a wireless-technology analyst at The Yankee Group.

Until recently, Wi-Fi phones were limited to businesses and colleges that could set up Wi-Fi in a building or a campus. Now, Wi-Fi «hot zones» range from a 100-block section of Spokane, Wash., to the Gare du Nord train station in Paris, broadening the market for Wi-Fi phone service. Kansas City has its share of Wi-Fi zones, such as Kansas City International Airport.

«Hot zones are proliferating,» said Robert Schwartz, IDT’s executive vice president. «We think in some segments of the market, this could replace home phones.»

Wi-Fi — short for «wireless fidelity» — phones employ a technology known as Voice over Internet Protocol, which translates conversations into packets of data that are sent over the Internet, instead of the old, circuit-switched phone system, for part of their journey.

Wi-Fi antennas broadcast a high-speed Internet connection over the radio spectrum to computers within a few hundred feet. Because that part of the spectrum is unlicensed, free and low-priced Wi-Fi access has cropped up in cafes, bookstores and airports. There are about 18,000 Wi-Fi hot spots in the United States, and the technology is used in hundreds of thousands of homes.

ABI Research predicts that the Wi-Fi voice market will be just $20 million by 2009. By comparison, the five largest U.S. telecom companies had $188 billion in revenue and $18.7 billion in profits in 2003.

Still, voice over Wi-Fi could siphon business from landline and wireless carriers already struggling amid intense competition.

Consumer long-distance companies like IDT see broad new markets for Wi-Fi phoning.

IDT sells 20 million calling cards a month, mostly to new immigrants who may not have their own phones. The Wi-Fi phone packages the company is testing would be aimed at the same demographic, with prepaid service, like its calling cards. Schwartz said IDT would expand the offering beyond Newark if it was successful.

With big telecom carriers showing little interest in advancing voice over Wi-Fi, David Gross, a senior analyst at Wireless Data Research Group, thinks the big test will be whether businesses adopt it, at the very least for internal calls.

Some already have — and are enjoying both cost savings and extra functions made available by voice over Wi-Fi.

Vocera Communications Inc., a privately held maker of Wi-Fi communications products, has signed on about 65 hospitals, libraries and retailers, including Best Buy Co. and Target Corp.