Why VOIP is headed for your cell phone
Internet calling isn't just for PCs. It can also save you lots of money on mobile calls abroad.
By Patrick Baltatzis, Business 2.0 reporter

SAN FRANCISCO (Business 2.0 Magazine) - For millions of users, voice over Internet protocol, or VOIP, is lowering phone bills for calls they make from their PC or land-line phone. But soon VOIP could cut cell-phone bills, too - most of all for international users.

It's a hard concept to get your head around: Many customers already pay a flat monthly fee for a bucket of calling minutes within U.S. But for business travelers, international students and immigrants, calling abroad can add up quickly. However, if they're already paying for a data plan, routing international calls over their phone's data connection -- using VOIP -- instead of a carrier's voice network, they can save considerable money.

That's the bet that Mino Wireless is making. The Sunnyvale, Calif.-based startup is offering cut-rate VOIP calls at 2.2 cents a minute to 40 countries, and claims to be the first to introduce VOIP on mobile phones to the U.S. market. To use Mino, you need service from Cingular, Nextel or T-Mobile, a data plan, and an up-to-date phone that can run Java.

With Cingular calls to some countries in Asia running as much as 89 cents a minute, the appeal of VOIP on cell phones becomes obvious. You can sign up for international calling plans with lower per-minute rates, but Mino's rates are still considerably lower. Since launching its service in January, Mino has attracted 20,000 users.

"Our service is for the businessman on the road who needs to call a customer in Japan on the fly," says Mino Wireless founder Jing Liu, who raised $1.5 million in venture capital for his company last month.

Liu sees his company's customers as road warriors, immigrants, and students with ties overseas.

"There are 70 million first-generation expats in the U.S.A. alone, and the market for international calls is $10 billion," says Liu.

Of course, many of those calls are made on regular phones or a PC-based VOIP connection. But most people can't afford to stay tethered to a PC all day.

"For the person who wants mobility, who needs to be on a cell phone and reachable while moving around, VOIP is not going to be the primary phone service," says Jupiter Research analyst Julie Ask.

Being first may not be much of an advantage for Mino: Venture capitalists put $700 million into 76 VOIP startups last year.

And of course there's Skype, which now counts more than 100 million VOIP users around the world.

Skype, an eBay (Research) subsidiary, is also entering the mobile market by adding support for Skype on smartphones running Microsoft's (Research) Windows Mobile software. And iSkoot, a startup in Cambridge, Mass., is adapting Skype for Cingular subscribers who use some Nokia (Research) models, Motorola's (Research) Razr, and Palm's (Research) Treo smartphones.

Ultimately, though, wireless carriers may offer VOIP themselves to lower the cost of maintaining their networks. In theory, VOIP calls could let them carry more phone calls without having to add cell-phone towers or buy more pricey radio spectrum. All major U.S. carriers are currently conducting trials, according to Jupiter's Ask.

"Carriers are definitely interested in VOIP," she says. "They can implement it themselves, but they are concerned about voice quality and the ability to provide value-added services such as voicemail [on top of it]."

And carriers ultimately control the traffic that flows over their networks, whether it's data or voice. Ask points out that if companies like iSkoot and Mino grow too big, carriers will no doubt block these services from their networks and offer VOIP themselves.

That's the irony of the VOIP over cell phone phenomenon: It may one day become so successful that it just becomes part of regular service. And we'll be back to making cell-phone calls as usual. They'll just cost a lot less.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.