The End of Cell Phones?

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I was like a kid unwrapping his Nintendo Wii. The label read “Vonage,” so I knew this was my newest gadget, a tiny white and orange UTStarcom F1000 wi-fi phone. I cracked open the box, threw aside the instructions (who needs those?) and cradled the phone in my hand like an oversized pearl. Call me dramatic. But this, I thought, is a piece of the future.

Through the magic of wi-fi and VoIP, my new phone brings my business line to any wireless access point, from dive bars to coffee shops, and lets me call anywhere in North America, at any time, for about $20 a month. Given that last month’s cell phone bill cleared a few hundred bucks, that’s a big deal.

I couldn’t wait to try it out. So I charged it up and took it for a spin. Once in downtown Toronto, I searched for a signal, and found several. And that’s when it hit me. All that speculating about VoWiFi—voice over wireless fidelity—is becoming reality. And while there’s definitely room for improvement (for starters, the phone has an anachronistic black-and-amber interface reminiscent of an old calculator watch), it begs the question: is this the beginning of the end for cell phones?

By the Numbers

There’s been lots of talk about VoWiFi and when, if ever, it might make a dent in the mobile market. The promise is somewhat obvious: if and when cheap or free wireless blankets cities, anyone with a wi-fi phone and a VoIP line can get the benefits of VoIP on the road. And that, in my mind, makes arguments for cell phones pretty dubious. I already find great advantage in using one phone to connect to my home wireless router as well as wireless access points out and about. If there were greater wi-fi coverage, I wouldn’t need my cell phone much at all.

Is such enhanced coverage likely? The number of ad-hoc places offering free wireless is large and growing. Then there are initiatives such as Toronto Hydro’s One Zone and Wireless Philadelphia that aim to blanket cities with cheap or free wi-fi access. In the US, both Google and Microsoft are working to provide free ad-supported wi-fi, while parts of London now have such ad-supported wi-fi through a partnership including Free-hotspot.com and MeshHopper.

In Canada, Telus, Rogers and Bell dominate the mobile market. But even though it seems everyone and their grandparents have cell phones, Canada lags in mobile uptake. While wireless subscriptions grew by 10% here last year, mobile penetration is at just about 58%, compared to 85% in the US. So there’s clearly room for growth. What’s not clear anymore is where that growth will occur. After all, Vonage reports adding about 25,000 new lines per month in North America.

Making the Switch

A shift to VoWiFi could have a major impact on mobile marketing. If every call, for example, were made through an ad-supported wireless network, it could dramatically increase the number of impressions (if we could call them that) available for mobile ads. Furthermore, as Google works to refine its mobile AdSense services, we could see geographically contextual advertising served up, possibly at some point even related to phone conversations themselves. Talking about grabbing a coffee? Perhaps you’ll see an ad for the nearest shop. After all, Google already does this with email conversations in Gmail.
But perhaps I’m getting ahead of myself. Is the switch to VoWiFi even likely? After using my new phone for a week, I would say there’s a good chance. It’s justified by the cost alone. What appears most likely, however, is a shift towards dual-use phones that can operate using wi-fi when it’s available and other signals when it’s not.
Regardless, the threat and shifting landscape alone appears quite interesting.

Frank and Gordon can talk all they want about free calling within the Bell network, but when I get essentially free calling to anywhere in North America, it’s easy to see how they’ll soon be retiring to the ravine.
Maybe then I’ll give them a call from the bar. After all, it won’t cost me anything.

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6 thoughts on “The End of Cell Phones?

  1. Geofferson Marcy

    Simon,
    I’m on the exact same page as you with this article. I currently use skype whenever possible and have scaled down my cell phone plan to a prepaid version. I’ve been waiting for WIFI blankets to take over Toronto, so I can throw away my cell phone and grab a skype (WIFI) friendly model! I still think we’re a few years away from the ideal scenario, but it’s exciting to think about isn’t it!

  2. Bruce Martin

    Just a clarification: You imply that Toronto Hydro’s One Zone offers “cheap or free wi-fi access”.
    At almost $30 a month, this service is neither cheap nor free. And, because it works only outdoors (or, in some cases, if you you are seated up against a window) it’s unlikely to be the only Wi-fi service a mobile user relies on.

  3. Simon

    Bruce, I agree with you that One Zone isn’t cheap–right now. Wireless Philadelphia is free, however, and I was sort of implying–although apparently without success–that this is the direction initiatives such as One Zone will move in the future. But criticism accepted. Thanks for the feedback!

  4. Phil Barrett

    With rumours of a google phone in development, it’s only a matter of time before they start offering free mobile services supported by ad sense and similar mobile enabled platforms.
    There are around 700 million internet connections in the world right now…but over 3 billion mobile devices.
    I predict this type of model will appear sooner then we may think!

  5. Stephane Lagrange

    Great post Simon!
    Outside of VoWiFi, there are other services that enable you to maximize the minutes you are not using within your mobile service plan. Check out http://www.rebtel.com/.
    You can basically phone any number in the world for the cost of your local minutes. You can also give your friends (for RebTel enabled countries) your own RebTel number so that they can call you for the cost of a local phone call too. It takes a bit of work to setup but for us Canadians who don’t have the luck to have SkypeIn numbers yet and who suffer from the prohibitive costs of our monopolistic mobile providers, it is an interesting alternative, well at least for now, to maximize the usage of our mobile plans.
    For the record, I’m not involved in RebTel and I don’t own shares. I just find it a cool service/idea that I’d thought I’d share here.

  6. barold

    i don’t think wifi can relay your session from station to station, can it? I think that would also mean you’d be stuck in a 100m area, waiting for your ads to load before you can complete your call. Wifi is great for certain things, but I’m not sure it would be ideal for telephone purposes in it’s current incarnation.

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