Mobile operators prepare for WiFi challenge

The mobile phone industry is constantly searching for the next big thing – and every year, when sector experts gather at the 3GSM World Congress, they claim to have found it.

The buzzword at this year’s conference, held last week in Barcelona, was “convergence”: the integration of fixed-line and mobile phones with the internet. Nokia, the world’s largest handset manufacturer, threw its considerable weight behind internet telephony by unveiling its first mass-market model capable of switching between WiFi broadband and a mobile network.

The handset will work via an operator’s mobile network and switch to a Voice over Internet Protocol (VoIP) connection when it comes within range of a WiFi hotspot. It will allow users to make cheaper calls and put further pressure on mobile voice tariffs.

3’s big announcement was that Skype’s VoIP service will be available on its network later this year. It is widely acknowledged that VoIP will transform the mobile industry’s business model by making calling effectively free. But operators such as Vodafone, which is trying to protect revenues from traditional networks, had hoped its introduction was a few years down the line.

BT launched a fixed-line/mobile phone with Motorola at the end of last year, and at 3GSM it unveiled the first WiFi handset in its range. The Motorola A910 – which will become part of BT Fusion’s line-up later this year – and Nokia’s N6136 support both support WiFi and Unlicensed Mobile Access (UMA) technology to enable a smooth handover for voice calls between WiFi and mobile networks.

Head of corporate communications at Nokia UK Mark Squires says: “UMA is the way forward because it offers flexibility. People will pay a certain amount when they’re out, but less when they’re at home.”

There are likely to be at least 25 WiFi mobile phones on the market by the end of 2006 but director of global wireless practice at Strategy Analytics Phil Kendall says: “Twenty-five models in a world where there are thousands of handsets is a drop in the ocean. It will be a long slog and I think they’ll stay niche for at least a couple more years.”

Strategy Analytics predicts that fixed-mobile convergence (FMC) will start to gain momentum in more mature markets but predicts FMC products will only account for 4% of the global handset market by 2010.

While wireless internet could be a threat for the likes of Vodafone, it is an attractive proposition for internet giants such as Google because it makes location-based services a possibility. Google could even make a concerted move into the telecoms sector, according to Gartner analyst Ben Wood, who predicts the company could become a mobile virtual network operator.

But Wood is sceptical about UMA technology in the UK. “I can see it working in places like Germany and the US, where large parts of the country aren’t covered by the mobile phone networks,” he says. “But we’ve got huge bundles of minutes here so people can already make free calls.”

It is too early to say whether WiFi will prove to be the next big thing in mobile telephony, but it certainly looks like being the next big challenge operators will face.

Robert Lester

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