With traditional telephones in decline and wireless service on the rise, the Supercomm telecommunications trade show was full of vendors hawking the next big idea - making the two networks act as one. Phones and equipment that could combine mobile and traditional services, mainly by using cheaper Web-based calls sent over short-range wireless networks known as Wi-Fi, were hot items at the convention.
At least three US telecommunications companies - SBC Communications Inc, BellSouth Corp and Sprint Corp - have said they plan over the next several months to sell services based on telephones that essentially act as cordless phones when near a Wi-Fi signal and cellular phones everywhere else.
While their first efforts will be aimed at business customers, SBC and BellSouth both say they plan to offer such services through their Cingular Wireless joint venture to residential consumers sometime in 2006. Some international companies, including BT Group, are launching similar services this year.
Demand for such phones will be small at first, says industry analyst Jeff Kagan, but will grow dramatically.
"Over the next several years, people are going to get used to their cell phone as their only phone," he said. "That's when this whole thing will flip, and we'll all go to Wi-Fi-cellular phones."
ABI Research analyst Philip Solis estimated in a report last month that by 2010, annual sales of "dual-mode" phones could reach 100 million. Several companies, such as UTStarcom, already sell handsets that can only carry voice calls over Wi-Fi connections, and UTStarcom plals to sell a cellular and Wi-Fi dual-mode phone later this year.
What's driving these trends in the United States is a combination of market forces and the control traditional telephone companies have over their wireless arms.
While wireless usage continues to grow in the United States, so does the cost of expanding wireless networks and buying radio spectrum rights. Growing wireless use has moved traffic off old-fashioned voice networks, making them less efficient and more costly to run. And more voice calls are being transmitted as Internet data, which allows for easier handling across several networks.
"If I can get a bit of capacity to your cell phone, I'm going to do it the cheapest way I can," BellSouth Chief Technology Officer Bill Smith said in an interview with Reuters. "If you're sitting in your living room, maybe using a Wi-Fi connection off your DSL (broadband) service is a cheaper way to get there."
Smith and other executives said that many wireless calls - up to half of the customers' minutes in some cases - typically take place in homes or offices, where a Wi-Fi connection could more cheaply route the calls onto traditional telephone networks.
BellSouth said it would test an integrated wireless-wireline service with an Atlanta advertising agency, where employees will receive a Motorola Corp phone. In a demonstration at Motorola's Supercomm booth, the silver flip-open phone transferred an active call from a Wi-Fi port to Cingular's network.
Telecommunications companies are already looking beyond voice calls to other services that could move freely across networks. Several equipment makers showed off products at Supercomm based on IMS, an emerging standard for everything from phone books to mulitplayer video games.
Deutsche Bank analyst Brian Modoff said that despite the hype, such services would start to roll out no earlier than 2007.
"While most of the major network vendors displayed IMS gear with a dizzying array of potential applications," he said in a research report, "IMS still offers more smoke than fire."