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Technology Stocks : Net2Phone Inc-(NTOP)

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From: carreraspyder11/15/2004 9:30:54 PM
   of 1556
 
VoIP Cuts the Cord (NTOP and Wi-Fi; new)

By Kevin Fitchard
Wireless Review, Nov 1, 2004

wirelessreview.com

Earlier this year, Net2Phone began quietly distributing to channel partners what looked like a rather bulky cell phone. The plain, unmarked gray handsets weren't cellular devices, however — they were 802.11 phones that transmitted IP voice over unlicensed spectrum. Net2Phone was moving in a new direction: It was taking its broadband voice-over-IP technology and making it portable.

Net2Phone has always been known as an industry leader, but wireless isn't exactly its forte — that would be VoIP. The company launched the first VoIP service in the mid-1990s, and while the predominantly dial-up market wasn't ready for IP telephony at that time, the service laid the foundations for the VoIP craze we're experiencing today. Now, Net2Phone and other VoIP providers think the market is ready for the next stage of the technology's evolution: wireless/wireline convergence.

“We're building on what we launched with our voice-line service,” said David Span, vice president of product management and marketing for Net2Phone. DSL, cable modems — these are all just edge technologies that enable VoIP, Span explained.

“Wi-Fi is just another edge technology,” he said. “The difference is Wi-Fi gives you mobility.”

As wireless/wireline convergence gains momentum outside of vertical markets, its biggest proponents aren't the big wireless carriers, the IOCs or even the RBOCs. They are the VoIP providers, all of which have some kind of wireless initiative in the works. Last month, Vonage and Boingo Wireless partnered to deliver the former's VoIP service over the latter's nationwide network of hot spots. Meanwhile, peer-to-peer IP telephony upstart Skype introduced software that can be loaded into voice-enabled PDAs, turning them into softphones over any 802.11 network.

“So much of the focus on the wireless convergence has been in the enterprise space, but it is slowly shifting over to the consumer space,” said Frank Hanzlik, managing director of the Wi-Fi Alliance. “VoIP providers like Vonage and Net2Phone are pushing that envelope.”

IN MANY WAYS IT'S FITTING THAT THE BROADBAND VoIP providers are the first to pursue voice over Wi-Fi. All voice convergence strategies — whether wireline to cellular, cellular to Wi-Fi or Wi-Fi to wireline — have one thing in common: voice over IP is the technology linking them together.

While it's possible to flip-flop between the TDM cellular network and the TDM POTS network, the nightmare of integrating those two legacy networks into a single platform that discretely handles multiple connections under a single phone number is more than most technologists would want to tackle. And unless someone figures out a way to route a circuit-switched call through an access point, Wi-Fi would be left out of the equation entirely.

The fact that VoIP is based on open standards pervasive across today's data infrastructure makes it the natural candidate to effect that convergence. Consequently, every carrier that has talked about wireless/wireline convergence has mentioned VoIP.

VoIP may be the technology that bridges the gap, but there are still some critical elements of its structure in need of redesign. Net2Phone's Wi-Fi service is now commercially available to all its resellers and carrier partners, but Span is the first to admit that the technology behind it needs some work for it to achieve true seamlessness. Net2Phone is targeting the service to its business users, either those mobile professionals who travel enough to seek out public hot spots for making voice calls or subscribers wanting to blur the line between home and work. The problem is that a customer can't just wander under an access point and start making calls — he has to log in and authenticate service in each hot spot, and there is no call handoff between access points if that customer is wandering through a hot zone, for example.

Span cautioned that VoIP is not a cellular replacement service-Net2Phone is focusing more on the concept of portability than mobility. But within those parameters, the company is trying to make the service as seamless as possible. Net2Phone has programmed its phones to recognize known networks and their log-in and authentication protocols, reducing a customer's IT involvement to a prompt.

In addition, Net2Phone has taken pains to treat the IP phone as an extension of the network, not an independent agent. It's enabled call forking, causing a customer's home extension and a Wi-Fi phone logged into a wireless network to ring simultaneously. Whichever device answers first establishes the connection, and the user can define how his Wi-Fi phone behaves, placing more or less emphasis on his portable device or home line.

Span said it's critical that as much of the intricate machinations in establishing those connections be as transparent as possible.

“If this becomes a total tech play, it will never get into the mass market,” Span said. “It has to be very simple. If there's a connection out there, the phone will go find it.”

The problem is finding those connections. While it's easy to establish a Wi-Fi connection through a home wireless gateway or over the corporate LAN, the prospects of finding one in between are far more limited. Net2Phone's service will log into any public (i.e., free) hot spot, but aside from the handful of communities and municipalities offering free Wi-Fi service and the few good souls that open their access points — often unwittingly — to the public, there are few free hot spots. The growing matrix of hot spots in airports, coffee shops and hotels is primarily built on a for-pay foundation.

Net2Phone said it is investigating the possibility of signing deals with hot spot providers, but even if it did so, there is only so much coverage it could achieve. The hot spot community is so disjointed and fragmented that only a handful of nationwide providers have more than a thousand hot spots. Most are spread among hundreds of providers, and though many have signed roaming agreements or joined together in aggregated networks, there is no system that allows more than a fraction of those networks to interoperate.

The challenge in pushing VoIP into hot spots isn't the access infrastructure, said Lynn Lucas, vice president of product marketing at Proxim. It's the backend billing — getting all of those disparate networks together. The problem has already been made painfully apparent in the business model for Wi-Fi data: A Wi-Fi user can be in an urban area surrounded by dozens of access points but won't be able to log into a single one of them unless he's willing to establish a separate billing relationship each time he moves onto a different network. Customers are already frustrated in the data realm; the problem will only be exacerbated when brought to voice, Lucas said.

“We still face challenges with data billing,” Lucas said. “There's not a single national provider that will allow you to move from hot spot to hot spot on different networks using the same billing plan. The rollout of voice over Wi-Fi is doable, but from the customer's perspective, there has to be one network.”

IF WI-FI IS THE KEY TO MAKING VoIP PORTABLE, cellular is the technology that will unlock true mobility. Many companies have touted the possibility of using VoIP and a Wi-Fi access card to create a device that functions as a home line within the confines of one's home network and as a cellular phone when it leaves the door. Surprisingly, one company raising such a possibility is SBC Communications.

As an RBOC, SBC is strongly invested in the public network — circuit-switched wireline telephony has been the basis of the Baby Bells' business since Ma Bell was created. All of the RBOCs have acknowledged VoIP as the technology of the future, and a few of them have launched limited business and residential services. But few in the telecom industry expected them to be among the first to fully embrace VoIP, let alone to propose a wireless/wireline convergence strategy built around the technology.

While SBC hasn't announced any launch dates or the details of specific service plans, chief technology officer Chris Rice said the carrier is definitely working with its Cingular Wireless subsidiary to launch a cellular/Wi-Fi phone. But first, it's starting with data. As SBC's FreedomLink Wi-Fi service grows from its 3900 current hot spots to the 20,000 projected by the end of 2006, the company will begin integrating Wi-Fi with Cingular's GPRS/EDGE services. Those efforts, coupled with a marketing push to bring Wi-Fi to the home — SBC in October said it was selling as many 3000 home Wi-Fi gateways a day to its DSL customers — will create wireless data penetration across wide area, local area and home networks. It's only another step to add voice to that mix, Rice said.

“From a data perspective, SBC already has a client that detects whether you're in a Wi-Fi hot spot or have access to a GPRS/EDGE network, giving you a choice of which you log into,” Rice said. “That same kind of authentication can be brought to the voice side. SBC Labs is working on an authentication token that will initiate a call on a Wi-Fi network if it's available, or revert to the cellular network if it's not.”

The key to that service would be VoIP, which would power conversations over the Wi-Fi network at home and over hot spots with a softswitch managing the calls on the cellular, public Wi-Fi and home telephone networks. The service wouldn't necessarily be end-to-end IP, as the cellular component would still run TDM. SBC and its vendor partners are developing technologies that would allow for direct handoff from access point to cell site, bridging TDM and VoIP as well as the two different access technologies. But Rice said the ultimate goal would be to create an endless IP-to-IP network.

“When you go from IP to TDM, you lose the IP features,” Rice said. “We want to be able to preserve those features.”

SBC said the benefits of the technology would be numerous. Not only would customers be able to eliminate the bother of two phone numbers (something a growing minority of customers are doing already by maintaining only wireless service), but it would bring the full application feature set of VoIP to an integrated wireline-to-wireless service. In addition, adding Wi-Fi to the mix would help stave off any future spectrum crunches as more minutes are offloaded to the IP network and help SBC leverage its growing hot spot footprint. Most significantly, Rice said, adding VoIP and Wi-Fi capabilities could improve the quality of voice calls.

Don't expect SBC's grand convergence scheme to pop up overnight, though. SBC won't have its Wi-Fi footprint built out until 2006, and the company is still working with Cingular to integrate data services across their two networks. The voice services will only come after.

“Is it here today? No,” Rice said. “Will it be here tomorrow? Definitely.”

VoIP providers are hoping that tomorrow will be here sooner rather than later. Not only have they launched their initial Wi-Fi services, but the Wi-Fi industry seems ready and willing to help them work out the glitches that would impede the technology from entering the mass market. The Wi-Fi Alliance has formed separate working groups to tackle issues facing Wi-Fi/cellular convergence and voice over Wi-Fi, and alliance members are producing a steady stream of handsets, intelligent routers and billing and authentication systems to help ease that transition. In the enterprise space, a partnership between Motorola, Proxim and Avaya has already merged VoIP over the wireless PBX and cellular networks, and they've said it wouldn't be long before those technologies can be optimized for consumers.

One thing Wi-Fi has shown, however, is that a technology doesn't have to first gain prominence under the enterprise's wing to achieve popular appeal.

“We all thought Wi-Fi would get its start in the enterprise, but we were wrong,” the Wi-Fi Alliance's Hanzlik said. “We have to be careful we don't get into a very traditional mindset. Wi-Fi was a very grassroots technology.”

So was VoIP. Vonage's popularity seemed to come out of nowhere last year. And just like Vonage and other consumer VoIP providers capitalized on the growing popularity of broadband connections to enter the home with voice, they are now thinking they can use the growing popularity of home wireless networks as a gateway to voice over Wi-Fi. Much of the broadband and residential VoIP gear shipped today already has Wi-Fi routers built in, said Lou Holder, Vonage's executive vice president of product management.

“Whether they use it or not, they already have Wi-Fi capabilities in their home,” Holder said. “That's a lot of people who could potentially use a VoIP over Wi-Fi service, regardless of whether they know it or not.”

Carriers With Announced Wireline-Wireless Convergence Plans

• Net2Phone — Launched VoIP over Wi-Fi on public hot spots and home and business LANs through its reseller and carrier partners
• Vonage — Launched VoIP over Wi-Fi over Boingo's nationwide network of hot spots
• Skype — Developed software to allow Skype users to use Microsoft Wi-Fi enabled PocketPC devices as softphones over 802.11 networks
• SBC — Announced plans to allow handoff between Cingular's GPRS/EDGE wireless data and its FreedomLink hot spot service and is exploring using VoIP to integrate voice across the two networks
• AT&T — Announced it would pursue a single phone strategy for a combined home line/wireless service, using its CallVantage VoIP product along with a new MVNO powered by Sprint's network
• CenturyTel — Launching its own wireless MVNO using Cingular's networks and has declared plans to pursue wireless-wireline integration
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