T-Mobile Pilots WiFi/Cell Service

With little fanfare, T-Mobile US Inc. has launched its long-anticipated dual-mode WiFi-cellular service, known as "[email protected]," in a pilot program aimed at residential customers in Seattle. The pilot, which got underway yesterday, marks a milestone in the company's drive to make good on CEO Robert Dotson's pledge to make traditional landline phones obsolete.

It also puts the Big Three U.S. carriers -- Cingular Wireless , Verizon Wireless , and Sprint Corp. (NYSE: S) -- that T-Mobile is willing to risk losing paid cellular minutes to unlimited, flat-rate calls over WiFi connections, in a bid to deliver seamless roaming over different sorts of networks with different types of service plans.

T-Mobile customers in greater Seattle can purchase T-Mobile [email protected] products and services at the two dozen Seattle-area T-Mobile retail stores. Based on Unlicensed Mobile Access (UMA) technology, the service allows calls to transferred to and from T-Mobile’s cellular (GSM/GPRS/EDGE) network and Wi-Fi hotspots, either at home (with WiFi routers provided for free after a rebate) or in T-Mobile's extensive network of paid WiFi zones. The new service costs $19.99 per month on top of the customers' existing rate plans, as long as those plans cost $39.99 or more, and allows unlimited calling over WiFi connections.

T-Mobile is offering two dual-mode handsets, the Samsung Electronics Co. Ltd. (Korea: SEC) t709 and the 6136 from Nokia Corp. (NYSE: NOK), for the after-rebate price of $49.99 with a two-year contract.

Since customers can make unlimited calls using WiFi connections either at home or in T-Mobile WiFi zones, the new service represents a threat not only to VOIP providers like Vonage Holdings Corp. (NYSE: VG) and Skype Ltd. , but to T-Mobile's own conventional cellular-call business.

The [email protected] offer, however, could also provide substantial benefits to T-Mobile, a subsidiary of Deutsche Telekom AG (NYSE: DT), which is currently the No. 4 cellular operator in the U.S. Until recently, T-Mobile has been falling further behind its larger rivals. The pricing model, for one thing, calls for a flat rate on top of customers' current calling plans, so consumers can not easily replace their existing cell service by going all-WiFi all the time. In addition, off-loading some voice traffic to broadband Internet connections will, in theory, lower T-Mobile's costs by reducing traffic levels on its cellular network.

Longer term, cellular carriers like T-Mobile are faced with inevitable erosions of their pay-by-the-minute traffic as customers seek out innovative new services based on other types of networks, and T-Mobile has staked out a position at the forefront of this trend. Rather than taking a "fenced garden" approach of battling to retain customers on its proprietary networks, T-Mobile is betting that, as converged network services become popular and it becomes easier to roam across different networks, a customer-friendly "open-gate" model will help win new subscribers and build customer loyalty.

T-Mobile spokesman Peter Dobrow, confirming the launch of the pilot program, declined to comment on future plans for the service.

The number of Americans who use their mobile device as their primary phone is expected to climb to 40 percent from around 7 percent today, according to Craig Mathias, president of wireless consultancy Fairpoint Group (and an Unstrung columnist).

AT&T Inc. (NYSE: T), which expects to achieve complete ownership of Cingular when its proposed merger with BellSouth is approved by the FCC, is expected to launch its own dual-mode residential service in coming months.

The next question: Will the new hybrid WiFi/cell phones work over the citywide municipal WiFi networks that are being built in cities across the country?

— Richard Martin, Senior Editor, Unstrung

Be the first to post a comment regarding this story.
Sign In