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When BT Group this month unveiled its plans for Fusion, its dual-mode home-and-away telephone service, it fell in to step with a rapidly escalating trend in the sector: carriers around the globe rushing to converge fixed and mobile services in a desperate effort to offset the free-fall in their traditional wireline voice revenues.

Operators believe that providing a single phone number that seamlessly works across both networks will move some traffic back on to their fixed networks, thereby boosting revenues as well as increasing long-term customer loyalty.

The problem is that customers are calling from their mobiles rather than the landline phone, regardless of whether they are in the office, at home or on the move. As many as 70 per cent of European mobile calls are made indoors, says Marc Rouanne, chief operating officer of Alcatel Mobile Communications. Also biting at the telcos’ heels are the cable companies and voice over IP alternatives such as Vonage and Skype.

That is why fixed-mobile convergence (FMC) is being driven by fixed operators moving into mobile, says Mr Rouanne. “This is the revenge of wireline.”

According to Boaz Goldman, vice president of marketing at convergence vendor Outsmart, there are two approaches to FMC. “In one case, the subscriber has a variety of terminals that share one number. The other case is where there is a single terminal attached to several access networks, such as Wi-Fi, the cellular network or the office PBX,” he says. The key is keeping the same caller identity across all networks in the form of a single number.

Most attention is focused on the latter approach, based on so-called dual-mode wireless phones that seamlessly transfer across cellular networks and indoor wireless networks, whether based on Wi-Fi or Bluetooth. But the technology that allows calls to start on one network and flow into the other uninterrupted is still immature and vendor-specific.

An industry standard for seamlessness, known as Unlicensed Mobile Access (UMA), is under development.

But some observers say that dual-mode handsets that incorporate multiple radio technologies – especially ones based on the technically superior Wi-Fi as opposed to Bluetooth – are too costly a solution today. “Achieving a price point for mass market adoption of dual-mode phones is the most difficult piece of FMC,” says Angel Dobardziev, an analyst at Ovum. Mr Dobardziev says it will be 18 to 24 months before mass market Wi-Fi dual-mode phones are available. “This will slow down converged devices and convergence itself,” he warns.

That is why some vendors are taking an approach that focuses on the network rather than the phone terminal. Outsmart, for instance, uses a technique that makes any fixed terminal – whether a plain old telephone, an office IP phone or PC-based call software such as MSN Messenger – appear to the cellular network as a mobile phone. “That way you get all of the same account information and value added services from any terminal,” says Mr Goldman. “The key is to give smart services on simple terminals,” he adds.

Yet despite the high cost of dual-mode phones, initial consumer services are favouring this approach. Korea Telecom launched a combined cellular-WiFi phone last year, although the $500 price tag for the terminal and access point has made it unpopular. Then BT announced its Fusion service, based on Motorola handsets and a Bluetooth access gateway installed in the home.

Nearly every major carrier worldwide is looking at FMC. Brazil Telecom will launch a Fusion-like service later this year. BellSouth announced a trial in June. Bell Canada plans to test dual-mode handsets this summer.

But are callers going to buy into FMC simply for its convenience? Unlikely, say experts. “Operators are going to have to drive take-up with price incentives,” says Michael Knott, managing partner for Accenture’s communications practice.

One way that FMC can offer better tariffs is by costing calls to the fixed network at wireline prices and cellular calls at mobile-to-mobile rates, regardless of whether the originating phone is on the move or not. This principle, known as least cost routing, has been a common feature on office exchanges for years.

“Consumer FMC will be about pricing plans,” says Raghu Rau, vice president for global marketing and strategy at Motorola. “Operators will need to give all-you-can-eat bundles,” he says.

BT Fusion will offer bundled minutes and tariffs for calls to UK wireline numbers at the standard BT fixed tariff.

FMC also faces other fundamental hurdles. “There are still some technical challenges,” admits Bob Brace, vice president at Nokia Enterprise Solutions. He says battery life is short when using Wi-Fi, also citing problems of security and radio interference in these unlicensed frequencies.

Nokia announced this month that it will release its first UMA phones in the first half of 2006, with a consumer phone to follow soon after.

Yet despite the current focus on the consumer space, FMC is most likely to make quick inroads with the business segment, says Accenture’s Mr Knott.

One reason is that enterprise FMC will be centred on the company PBX, making integration easier.

“The one-number concept is driven by your office number,” says Carolyn Nguyen, global director of mobility strategy at Avaya, the enterprise telephony vendor, although she adds that even in the enterprise market dual-mode phones will be too costly to issue to all mobile employees.

Copyright The Financial Times Limited 2019. All rights reserved.

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