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BT launches combo fixed-mobile handset

But analysts say the complex issue of pricing will be key as to whether the product is a success with consumers.

U.K. telecom giant BT Group unveiled its fixed and mobile convergence service Wednesday, offering it with two pricing packages.

BT's new Fusion service, previously dubbed Project Bluephone, is aimed initially at the consumer market and is based on a cordless Motorola handset that acts as a cellular phone outside of the home, but inside routes calls through a hub onto a BT broadband line.

"The launch of BT Fusion will start with approximately 400 early-adopter customers, with the service being widely available for delivery in September," said Ian Livingston, chief executive of BT Retail.

The Fusion handset currently uses Bluetooth to connect to the hub, but the system is also set up for Wi-Fi, which means customers can also connect it with wireless-enabled PCs, laptops, games consoles and printers in a broadband home network. Consumers will also be able to use the hub with Wi-Fi cellular phones as they become available.

Fusion will come in two price bundles. The Fusion 100 will provide customers with 100 call minutes for 9.99 pounds ($18) per month, while Fusion 200 will cost 14.99 ($27) per month for 200 call minutes. Customers will also receive handsets and a hub as part of the package.

Analysts said that the launch of Fusion marks a watershed moment for the telecommunications industry. "The separate fixed and mobile telephony services are no longer (discrete) but are intertwined. It is not overstating the case to say that the industry will never be the same again," analyst house Ovum said in a research note Wednesday.

Despite the technological implications, getting the pricing right will make or break Fusion, according to Ovum. "BT is offering mobile to landline calls at the same price as its current landline rates--savings of up to 95 percent. This makes a great headline, but is just one type of call," Ovum said.

The 9.99 pound fee, on the other hand, compares "less well" with the bucket offerings of mobile operators such as 3, the analyst warned.

Fusion's success will also rest on BT getting its distribution strategy right. Most customers choose their service provider at retail outlets, but BT initially plans to offer Fusion only through its portal and by phone, said Ovum.

While this may seem counterintuitive, it does make sense as Fusion works only with a BT broadband line and the telephone company knows who all of its 1.3 million customers are.

Cath Everett of ZDNet UK reported from London.