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In a bid to bring two of the hottest technology trends together and put a potentially "disruptive" tool into the hands of consumers, Vonage said today it will roll out handsets later this year that will enable voice over Internet protocol (VoIP) phone calls using WiFi connections.
Vonage announced a partnership with UTStarcom, which will make a WiFi handset, the F-1000, that will enable users to make telephone calls through wireless Internet connections at so-called wireless hotspots, including hugely popular home-based WiFi networks.
The service is expected to be available by late spring or early summer, the two companies said in announcing the partnership at the Consumer Electronics Show in Las Vegas.
Growth Market
While the uptake of the new handsets might be slow at first, most analysts have pegged VoIP and wireless -- including mobile commerce and services -- as two sectors poised for dramatic changes in 2005.
Like all cutting-edge technologies, this one will likely find some adherents, with analysts citing college students as one potential growth market. Many campuses are wired to be free WiFi access points, and the lure of free calling could be an attractive alternative to cost-conscious students and their parents.
While WiFi calling handsets have been available in the past, most have been aimed at high-end enterprise users, are sold along with network services, and are considered too expensive or specialized for consumers or smaller businesses.
Specific pricing of the new F-1000 handset was not released, but analysts were quick to predict the devices would cost around US$100, with the existing base of some 400,000 Vonage subscribers having the ability to make WiFi calls for no extra charge. The handset will be sold through service providers and network operators, the companies said.
By comparison, some existing phones, such as those sold by Cisco (Nasdaq: CSCO) and aimed at vertical markets such as health care -- where traditional cell phone use can disrupt medical equipment -- cost more than six times that price.
Bidding for Disruption
Vonage CEO Jeffrey A. Citron said the new service will "lead the way in modernizing telecommunications as we know it, as now customers will have the option of mobile VoIP service." He added that the move was made to offer "consumers and small businesses ... a myriad of options when communicating with family, friends and business associates."
UTStarcom said the device would be another example of the "disruptive technologies" it has introduced in the past, including a low-cost wireless phone service, known as the Personal Access System, that is hugely popular in Asia and Latin America.
Because of the range limitations of WiFi, the technology could be most disruptive to at-home wire line phones by giving consumers the option of connecting both their telephones and their computers to a single broadband Web access point.
Targeting the Growth Market
While some traditional telecommunications carriers have moved to roll out their own VoIP offerings, most have moved deliberately.
That might be because previous attempts to lure customers have focused on the stagnant and increasingly unprofitable wired-phone market. Similar incursions against mobile customer 
bases could result in the wrath of the telecoms being focused on the VoIP companies,
"This is their growth engine, their profit machine, and they are far more likely to defend it," said Current Analysis senior analyst Brian Washburn. "The fact AT&T (NYSE: T) and Verizon have VoIP services on the menu now shows that it was approaching a critical mass in consumers' homes. They are wary of the potential of this technology to alter the way people consume phone services."
Taking Baby Steps
Many analysts say the WiFi-VoIP handsets will be something of an intermediate step, with handsets eventually becoming available that have the ability to make calls over both WiFi and traditional cellular networks.
Those devices are already in the works from both Motorola (NYSE: MOT) and Nokia, but have only hit the markets in targeted areas in Europe and elsewhere and aren't expected to be widely available in the United States for at least another year, IDC analyst Alex Slawsby said.
VoIP could help accelerate that same type of convergence, he added. Because VoIP traffic is converted into data, it can be manipulated more easily.
It remains to be seen, analysts said, whether consumers will want a phone handset that they can use to make calls at home and then take with them to call over wireless hotspots.
However, Washburn said enough consumers have been exposed to, and become comfortable with, VoIP calling now to make the leap to WiFi far more plausible. "The level of comfort grows every day along with the number of people using it," he said.
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