WiFi and the Phone

David Kirkpatrick (Fortune) writes that “as Wi-Fi grows to envelop cities, ‘Voice over Hot Spots’ could replace cell servicesand their profits.”

Scott Rafer, chairman of WiFinder, also consults extensively with wired and wireless telcos, especially in Europe. His most striking view: what he calls “Voice over Hot Spot” could eventually suck most of the profits out of the cell phone industry. He reconfirmed my own impression that the combination of Voice over Internet Protocol (VoIP) with Wi-Fi hot spot technology is likely to be transformative.

To travel down the Rafer trail you have to rid yourself of the notion that offering hot spots will be, in general, a terrific business. “Think of Wi-Fi like air conditioning,” he says. “You don’t make money off it, but it seems to be most everywhere.” That’s the world we’re headed for, he believes.

“This is a pure Clayton Christensen moment,” Rafer says. “It’s classic ‘Innovator’s Dilemma’ stuff. VoIP from hot spots works very well. This is the problem for the carriers. And it’s worst for them in Europe, because of a practice there called ‘calling party pays.’ Receivers of wireless calls don’t pay. So if you’ve got a Wi-Fi phone, you’ve got free inbound ubiquity. Then if you just walk to a Wi-Fi hot spot to make all your expensive long-distance outbound calls, you’ve hit the carriers where margins are now highest.” Rafer doesn’t think Wi-Fi will end up taking a huge volume of wireless callsat least not anytime soon, but it will nonetheless hurt the existing businesses. “It’s just another mediocre Internet technology that is disrupting the pricing power of more complete, but proprietary, technologies,” he writes in a follow-up e-mail.

Down the road, he sees a convergence of instant messaging and Internet voice calling: “I will go to my directory and hit ‘David Kirkpatrick,’ and it will ask, ‘Is this a real-time voice call or are you just trying to send a message?’ And the software will check not only if you’re available but if you’re available to me.”


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Rajesh Jain

An Entrepreneur based in Mumbai, India.