Gentay Communications, a Singapore-based startup, has just launched Nanu, an Android app capable of making VoIP calls even on low-bandwidth 2G connections.
This means that, in theory, the phone should be able to work in rural areas where 3G isn't available. The app lets you make app-to-app calls, as well as calls to landlines and mobile numbers.
Instead of charging customers to make a call, Nanu will be using sponsored ringtones to offset the cost. This means that calls are free, even to the aforementioned landlines and mobile numbers -- though the catch is it's only for 15 minutes and only for the first million who download the app.
As more users sign on, advertising revenue will grow, which will allow Nanu to subsidize more calls and add more free minutes.
I gave the app a quick test, and found that while on 2G, I could hear the other party clearly, but I was constantly breaking up on their end. On 3G, it was much better.