IDT to Offer Voice over Wi-Fi
By Eric Lin, Thu Apr 22 22:45:00 GMT 2004

American long distance carrier will launch a low cost Voice over Wi-Fi network, including their own hotspot infrastructure, to provide a low cost alternative to cellular. It sounds noble, but it doesn't sound likely to succeed.

American long distance operator IDT is preparing to launch an inexpensive pre-paid Voice over Wi-Fi network in a small setion of Newark, New Jersey. The idea isn't exactly original. Earlier Carlo wrote about Japanese ISP Livedoor, who will launch a prepaid voice over Wi-Fi service with rock-bottom rates. The difference is that in addition to selling the phones and the service, IDT also plans on installing the necessary Wi-Fi access points for coverage.

USA Today reports IDT wants to provide the service as a home / semi-mobile phone plan for people with low income in confined areas like nursing homes and low-income housing projects. For their pilot, they plan to install enough hotspots to provide coverage in the Ironbound neighborhood. IDT will also initially give away the handset, though eventually they'll be sold for as much as $100. Monthly service will be about $2 plus 5 cents a minute.

Rates like that are lower than any prepaid cellular plan, and depending on how much a subscriber talks, they might even be lower than fixed line rates. Despite the low price, will users really sign up for a wireless plan where they are confined to a small geographic area with IDT's infrastructure and a few open hotspots they may find scattered around? Prepaid mobile plans in the US have gotten quite inexpensive, many handsets are under $100, and they have a much larger calling area.

Whether users actually view IDT's plans as cheaper or more desirable is almost moot because of the infrastructure economics behind their plan. IDT is going to have to pay for and install access points (APs) in public. Not only is this costly, there is no way to secure the APs from getting stolen or damaged, so IDT will likely have to replace the APs often or provide continually degrading coverage. In addition, they will have to pay for backhaul to all the access points. Is it really possible to recover these fees for $2 per month plus 5 cents per minute- assuming they eventually charge for the handsets?

Wireless seems to be the post-dotcom startup buzzword- just add Wi-Fi to your business model for instant funding. Sadly, we fear many of these business will meet the same fate as most dotcoms.