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Wi-Fi in handsets - bright future or dismal prospects?

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Note -- this news article is more than a year old.

The industry hype and level of discussion surrounding fixed mobile convergence (FMC) would lead most casual industry observers to believe that in the near future all handsets will feature Wi Fi capabilities, and that everyone will use their cellular handsets to make voice over IP (VoIP) calls in the home and the office.

However, the reality is that, at the start of 2006, there were globally only around ten handset models featuring built-in Wi-Fi chipsets. The count has risen to approximately 25 handset models in 2007, driven by operators of both mobile and fixed networks launching fixed-mobile services and special home-zone tariffs. However, each operator still only provides a very limited choice of handsets with each service typically only supported by up to five different models. Additionally, many consumers who purchase Wi-Fi equipped handsets never use the functionality. Some of the new services that were announced in the second half of 2007 have started to address this issue and are planning provide a greater choice for the subscriber, which should increase the attraction of FMC offerings.

The other barriers to take-up of FMC services, directly affecting the demand for WLAN-enabled handsets, are the network and standards requirements that operators have to address. Many operators are still unsettled by the lack of commitment to a standard, be it UMA, SIP-based or another mobile VoIP solution. This uncertainty, plus the inherent desire to protect their existing service revenues from potentially disruptive third-party offerings such as Skype and Vonage, is delaying demand for Wi-Fi equipped handsets. Also, femtocells are starting to emerge as a viable marketplace solution, offering operators an option for an FMC solution that goes directly from cellular to broadband without the need for Wi-Fi as a bridge.

According to Bill Morelli, Mobile Technologies analyst at IMS Research, these barriers are having an impact on market growth. "From very few shipments in 2006 (1.6% of the global total), shipments of Wi-Fi equipped handsets are forecast to reach nearly one in five of annual shipments by 2012" states Morelli. "While this is respectable growth, it is far more moderate than what many ardent FMC supporters are projecting." This is primarily due to FMC services (both voice and data) being targeted at high-usage enterprise and leading-edge consumer customers. Operators are not predicted to want to provide such handsets to low-spending users, the ones most likely to seek third-party mobile VoIP applications in an attempt to avoid the cost of cellular calls. At present, Wi-Fi equipped handset shipments are expected to be limited to high-end feature-rich phones and smartphones, and will be priced out of the reach of the majority of users. Further, the Wi-Fi equipped handset market will be limited to subscribers with access to Wi-Fi access points for voice and data services.

While this looks like a fairly gloomy set of predictions, there is light on the horizon. The successful launch of several commercial UMA-based services, such as T-Mobile's HotSpot @ Home and the Unik service from Orange, have shown operators that there is revenue potential in Wi-Fi. Additionally, high profile partnerships such as Apple's arrangement with Starbucks to provide free music to iPhone users over Wi-Fi are driving stronger consumer interest.

Operators are also leveraging their existing network of Wi-Fi hotspots to attract cellular customers, for example, the UK O2's iPhone contract includes unlimited access to The Cloud's 7,500 hotspots.

These factors are expected to drive wider support and product variety from chipset manufacturers, handset vendors and operators from now. Apple and Nokia's decision to include Wi-Fi in their flagship products, the iPhone and N95 respectively, highlights the positioning of WLAN as a key differentiating technology, and is helping to raise consumer awareness. Increased competition between service providers is expected, as they seek to gain new subscribers and reduce churn; many operators in mature markets are expected to continue in attempts to acquire broadband providers. Improved chipset availability and choice will also help to drive the market, with companies developing single- and dual-chip solutions, specifically targeting this market. In addition, the handset OEMs will see an opportunity to market converged devices to subscribers in an attempt to differentiate their products, and to tap into the growing popularity of mobile VoIP and data access.

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Tags: skype  voip  starbucks  o2  ims  fmc  femtocells  hotspot  hotspots  wlan  chipset  mobile voip  wi-fi hotspots