Wi-Fi phones lack carrier support

A recent deal between Nokia and Cisco Systems gave Wi-Fi cell phones a key boost--but analysts say the devices may be slow to catch on, because carriers remain reluctant to sell them.

On Monday, Nokia said its Communicator 9500, due at year's end, will be able to use Cisco Aironet access points, usually found in corporations and hotels, as well as in executive lounges in airports and train stations. The world's largest handset maker joins Motorola, which is building a cell phone that uses Wi-Fi chips from Texas Instruments.

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Wi-Fi phone proponents say the phones combine two complementary wireless technologies. Wi-Fi is fast, has a 300-foot range and can be used for downloading large amounts of information. Meanwhile, cellular networks stretch for hundreds of miles but can usually only manage download speeds of about 50 kilobits per second to 500kbps.

But Wi-Fi phones are missing crucial supporters: the wireless carriers that sell the phones.

Brian Modoff, a Deutsche Bank Securities analyst, said carriers face challenges in switching between the two different wireless networks and properly handling the complex billing. While handset makers predict an early 2005 launch of the technology, Modoff and others expect it to take longer for these devices to get the full backing of carriers.

"I cannot imagine the number of quality-of-service issues that would come from trying to do wireless local area network handoffs," Modoff said. "Who's responsible? How do you bill? What is the wireless local area network pricing?"

But he also believes that some carriers will inevitably jump in. "The carriers feel that they must be at the front end of whatever tech happens to be hot," he added.

Some carriers are already warming up to the technology. In a recent speech to analysts, Nextel Communications Chief Technology Officer Barry West said Wi-Fi phones could prove to be key to stealing away more business from local wireline phone companies. Meanwhile, Japanese cell phone service provider NTT DoCoMo has developed a test version of a Wi-Fi phone that's meant for a high-speed wireless network.

Wi-Fi phones armed with the appropriate software could ultimately use a home's Wi-Fi access point to make phone calls using the Internet, technology known as voice over Internet Protocol, or VoIP.

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That lets them accomplish something that cell phone service providers have been trying to do for years: replace the local landline phone company.

"I see an opportunity to attack the regional Bell operating companies," West said.

VoIP calls over a home broadband connection can be made for free or at prices that are sometimes half of what it costs to make a cell phone call. So why would a cell phone service provider want to sell or host such a service that has the potential to eat into more of its own revenue?

"Cannibalism in this business is inevitable," West said.