VoIP goes mobile

Olga Kharif
29 Aug 2008

Scott Goldman uses his mobile phone to call friends and business contacts all over the world, from Britain to Australia. But the Southern California-based consultant doesn't pay a dime in international tolls to his mobile-phone carrier, AT&T, the biggest in the U.S.

Instead, Goldman places the international portion of the calls"”roughly 100 minutes a month"”through a service called Gorilla Mobile that relies on Internet-based technology to route wireless calls virtually toll-free. Goldman, a user of Apple's iPhone, estimates that he saves hundreds of dollars a year with Gorilla's service. He stands to cut wireless bills even more by signing up for another, iCall, that's due for the iPhone in the coming weeks. The service will let him place low-priced calls from WiFi hotspots"”bypassing the AT&T network altogether. 'Once I can make calls using the WiFi network, I will, in all likelihood, reduce the monthly minutes I have [with AT&T,],' Goldman says.

Gorilla, iCall, and a growing number of other services rely on what's known as Voice over Internet Protocol technology that delivers speech via the Internet in much the same way as e-mail. VoIP calling is already raising a ruckus in telecommunications, putting pressure on the price of land-line calling and luring subscribers toward upstarts like Vonage (VG) and Comcast (CMCSA) away from incumbents such as AT&T, and Verizon (VZ). Now, the technology threatens to erode sales for mobile-phone service providers too.

Jajah's growth spurt

By 2011 the number of mobile VoIP users around the world may rise to 100 million from 7 million in 2007, according to ON World, a consulting firm based in San Diego. ON World estimates that in 2011, mobile VoIP voice services may generate $33.7 billion, up from $516 million in 2006, the most recent year for which the figure is available. If that sounds like a breakneck pace, consider the growth trajectory for Jajah, a provider of wireless VoIP, which had 10 million users in April"”a fivefold increase in just a year.

Wireless carriers are expected to generate $700.7 billion in sales of voice services this year, according to consulting firm Ovum. Still, carriers in the fiercely competitive mobile-phone industry will be none too pleased with newcomers snapping up a portion of the almost one-quarter of all wireless minutes now devoted to long-distance and international calls. Insight Research estimates that together, international and long distance will make up 24% of the 1.2 billion wireless minutes used this year.

VoIP technology is likely to make deeper wireless inroads soon. Skype, the eBay (EBAY)-owned service used by more than 338 million people to make free PC-to-PC calls, later this year plans to release a new product called 'Skype for your mobile' that will let customers use local wireless minutes to make international calls.

Truphone meets Nokia

Wireless VoIP services vary widely in how they work. Some, including Jajah, can be used with a basic cell phone and require that users call a local number that connects them to the service that routes a call overseas. Others are more involved, requiring that the user download software onto an Internet-enabled cell phone. In some cases, calls must be placed via WiFi network. What the services have in common, though, is that each helps wireless users circumvent at least some of the charges associated with long-distance wireless calling.

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