VoIP goes Mobile
By Mark Frauenfelder, Tue May 25 09:15:00 GMT 2004

VoIP is slowly moving into the mobile space, as one US company offers cellular users cheap international calls.

There’s one in every crowd -- the guy who can’t stop talking about how unbelievably cool his TiVo is. He dominates every get-together with unpaid testimonials to the wonders of digital video recording. He’ll jabber on about it all evening, enthusiastically describing how he couldn’t live without TiVo, how it’s changed his life, how it saved his marriage, etc.

In my experience, the only group of tech-adopters who exhibit anything close to the fanaticism of TiVo-heads are the VoIP devotees. And with good reason.

As you probably know, VoIP (short for Voice over Internet Protocol) is a way to use the Internet -- rather than traditional phone networks -- to make telephone calls. Phone networks typically route phone calls over a dedicated circuit, but VoIP networks send voice calls as plain old digital packets, using the standard Internet protocol.

Phone Bills Too Cheap to Meter

There are a number of benefits (and some drawbacks) to making phone calls over the Internet, but the number one reason people use VoIP is because it dramatically reduces phone bills. For example, through Vonage, a VoIP company, you pay a flat fee for unlimited local calling, and just pennies per minute to call other countries. The traditional phone companies, which for decades have been able to get away with charging several dollars a minute for an overseas call, are trying to compete with VoIP startups, but they just can’t keep their rates that low. Naturally, they’re doing everything they can to kill VoIP companies by lawyering them to death, but cool technologies have always been able to mutate their way out of any impediment. (Look at what happened when the record industry shut down Napster, and as a result, help spawn umpteen all-but-unstoppable peer-to-peer networks.)

The joys of VoIP have been restricted to landline phone use. This has made wireless carriers very happy. If you want to make an international or out-of-state call with your mobile, you are stuck with your wireless carrier’s typically exorbitant toll charges. For example, my carrier, Cingular, charges $1.49 a minute to call the United Kingdom, which is ridiculous. How can Cingular get away with it? Simple, it has locked its competitors out. It’s using the old movie theater concession stand tactic. The candy bar at the theater concession is worth 79 cents on the open market, but if you want to buy one at the movies, you’ll have to fork over $3.50. Sure, it’s robbery, but they can get away with it because you’ve got no other choice, other than sneaking a store-bought candy bar into the theater.

Guess what -- somebody has figured out a way to sneak cheap long distance into the cellular carriers’ networks.

Wireless Carriers’ License to Steal: Revoked

That somebody is i2 Telecom International, the Boca Raton, Florida-based VoIP company that will start shipping a new device, the InternetTalker MG-3, next month. The MG-3 will give wireless callers the ability to make international calls for a tiny fraction of the rates charged by wireless companies.

Here’s how the MG-3 works: first, you have to sign up for VoIP service with a company that resells i2 Telecom’s hardware and network access. You’ll get the MG-3, a little plastic box stuffed with microchips, which you plug into your broadband connection and existing phone line. Then, when you want to make a long distance call with your mobile, you just call your home number. The MG-3 will recognize the mobile’s number using Caller ID, and connect you to i2 Telecom’s VoIP network. You get a second dial tone, and you can make your overseas call. Want to talk to somebody in China? You’ll get charged 5 cents a minute. Cingular has been having a great time charging you $3.49 a minute for making the same call. (Wanna bet they’re screaming at their lawyers right now to cook up a way to kill this in court?)

It’ll take a while for people to start finding out about this new way to make international calls on mobile phones. The mobile carriers hope you’ll never find out, so they can keep gouging you. But they’re fighting a losing battle. One day, they’ll have to bring their prices down from the stratosphere and make them somewhat competitive with VoIP rates. They’ll never go as low as VoIP, though, because they know a fair percentage of folks are willing to pay extra every time they make a call rather than submit to the hassle of one-time set-up procedure for using a VoIP service. But that’s not my problem.