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Wireless World: Bye-bye to Ma Bell?

By GENE J. KOPROWSKI, United Press International   |   May 21, 2004 at 12:00 PM   |   Comments

A weekly series by UPI examining emerging wireless telecommunications technologies and markets.

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CHICAGO, May 21 (UPI) -- Local phone companies may soon be relics of a bygone era, as quaint as an RCA Victrola phonograph or a Kodak "Brownie" camera.

In the next five years, as technology start-ups begin offering wireless Internet telephone service commercially, look for consumers to chase low monthly telephone service prices, to be offered by developers located all over the United States and around the globe, futurists and technologists told United Press International.

"Voice is the killer application that everyone has been looking for -- for years -- on the Internet," said Jonathan Lieberman, president and chief executive officer of ISN Telcom Inc. in Miami.

An array of vendors, such as Motorola Corp., Cisco Systems Inc. and a number of obscure Taiwanese companies, are planning to bring hybrid wireless phones to the mass-market -- and soon.

The phones will work on both the regular wireless telephone network and over the Wireless Fidelity networks, connected to the Internet.

"The potential for disrupting the sleepy monopolies of the Bell System is there," said Edward Cespedes, president of Voiceglo Inc., an Internet telephone service provider in Fort Lauderdale, Fla. "With voice over Internet, all geography (for a phone provider) goes away."

The so-called Baby Bells have been battered for years -- ever since the 1980s when the Federal Communications Commission allowed competition for long distance service. Cellular phone companies drained away even more market share during the 1990s and have continued during this decade. The collapse of the 1990s technology stock market bubble also led to financial distress for many major telecommunications firms.

Now, WiFi phones may provide the coupe de grace for the era of wired telephony, ushered in by Alexander Graham Bell back in the 19th century.

"Cellular telephone service hurt the Bells by taking calls off of the wire networks," Lieberman said. "The same thing is going to happen with WiFi. The cord is going to be cut. It makes perfect sense that people will use WiFi broadband connections -- once envisioned just for data -- for voice."

The rapid proliferation of WiFi hotspots -- locales such as Starbucks Coffee or Kinko's Copies, where one can get wireless broadband Internet access -- is helping lay the groundwork for this coming technology trend. Local cable TV companies, which have been offering broadband service and digital subscriber lines, also may be pushing into the wireless business soon.

One of the first entrepreneurial phone companies to offer low-cost Internet telephone service back in the late 1990s, Net2Phone, of Newark, N.J., today is working with cable companies who aim to become "wireless Internet service providers," Sarah Hofstetter, senior vice president at Net2Phone, told UPI. "They already have video and data service offerings. The missing piece of their package has been voice."

Net2Phone is serving as the provider of Internet telephone services to cable companies, in a strategy announced just a few weeks ago.

"We've been in discussions with a number of cable companies," Hofstetter said. "Different opportunities exist. But we think wireless Internet can theoretically tackle phone companies and cell phone companies."

The early developers of hybrid WiFi and cellular phones -- which work primarily on the cellular network, but which jump off on to the WiFi network whenever they are near a hot spot -- are selling to hospitals and corporate buyers today.

"That's because the handsets are very expensive -- about $500 today," she said. "The value of making calls over WiFi is its low-cost. But that high price for a phone is a barrier to entry for a consumer."

As the prices start decrease -- new, less-expensive chip sets are in development by semiconductor makers right now -- consumers will flock to the phones.

"This has far-reaching implications," Hofstetter said. "Right now, there are 30 million homes in the United States that cannot access cable Internet or get (DSL) service. The only cost-effective way for them to get broadband is with wireless ISPs."

Hofstetter predicted the first wave of wireless ISPs will occur in rural areas, where customers' broadband needs are underserved. Another major area where wireless ISPs will proliferate, she says, is Iraq, as soon as the democratic transition takes hold there. Latin America is another prime target for wireless ISPs offering WiFi phone service.

"Don't just think Starbucks when you think WiFi," she said.

Do not expect the monopolies to go down without a fight, however, telecom experts said. The Baby Bells no doubt will attempt to join the expected Internet telephone frenzy themselves.

"Plain old telephone service lines are going to be phased out by the Bells," said Hunter Newby, chief strategy officer of Telx Inc., a networking firm in New York City. "All switching of calls over circuits is going to be phased out," he told UPI.

Newby said the Bells would replace plain old telephone service with DSL service in hopes of luring consumers who crave broadband Internet access. They also may offer wireless Internet service -- if for no other reason than to be perceived as being as sophisticated as their emerging competitors.

"Traditional phone companies will eventually need to offer this kind of phone service," Steve McFerson, owner of TeleCost Management in Orange County, Calif., told UPI.

William Johnson, a professor of telecommunications engineering technology at Rochester Institute of Technology in New York, told UPI, "the monopoly will be gone."

Still, some experts are skeptical the Bells will fade away so easily -- especially because they provide access to emergency services, such as 911 calling, which is not easily available over WiFi or Internet networks.

"Just last Friday, I was looking into Vonage (an Internet telephone company) as a way to save money," Bill Norton, a consumer who lives near Charlotte, N.C., told UPI. "Then I got the legal agreement, and the warnings about 911 service stopped me in my tracks. If I was reading it correctly, the agreement indicated that not only would I have to do some manual configuring to be able to dial 911, but that even once configured, dialing 911 from a VOIP (Voice Over Internet Protocol) phone wouldn't work as well as it does with a conventional phone -- nor would it work at all in a power outage. I detest any monopoly, but I'm not about to endanger my 4-year-old daughter and 2-year-old son to save a few bucks."

There also is the possibility the federal government will step in and regulate WiFi phones, just like they do with regular phones, and forestall the death of Ma Bell and her progeny.

"The FCC and state regulators will start to impose the same regulatory frameworks, and costs, on VOIP as on traditional telco," Jim Veilleux, a consultant with VoiceLog LLC, a telecom consulting company in Charlotte, N.C., told UPI. "Otherwise, the whole fee structure imposed on traditional telco collapses."

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Gene Koprowski covers telecommunications technology and markets for UPI Science News. E-mail sciencemail@upi.com

© 2004 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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