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Vonage Shows Off WiFi Phone

Let's say you're a small business owner, which almost by definition means you're a mobile worker. You've got VOIP service at your small office or home office, but many of your calls are by necessity taken while you're in transit, or at the airport, or at your local coffeeshop. It'd be great to be able to use your VOIP service there, too, and save those cellphone minutes -- right?

That's the general idea behind the new portable WiFi handset from Vonage Holdings Corp. (NYSE: VG), manufactured by UTStarcom Inc. (Nasdaq: UTSI) and called the F1000. Unfortunately, the new WiFi phone, which will work at public WiFi hotspots and retails for $129.99 ($79.99 with an instant $50 rebate), is directed almost exclusively at the consumer market, at least for now.

Vonage EVP of product development Louis Holder admits he has "no idea" how many small-to-medium-sized businesses are likely to take up the WiFi-enabled phones. "We started out strictly consumer, but I can see it growing. We're starting to get some interest from businesses that are looking to save money on their phone service."

There are a couple of obstacles to enterprise uptake of the F1000: For one thing, it's WiFi only, meaning that harried employees would have yet another device to carry. Eventually, devices that roam seamlessly between WiFi hotspots and cellular networks will solve that problem. "What you'll probably see eventually is dualmode functionality -- half WiFi, half cellular," Holder predicts. "We've started working on that, but it's still some ways off." Indeed, ABI Research has predicted that sales of dualmode mobile phones will exceed $100 million, but not until 2009.

Another obstacle is that the F1000 works only over public WiFi networks (such as free municipal or airport networks), not over fee-based networks. For now, at least, that limits the coverage offered by the WiFi phones.

The most important obstacle, however, may be security. Even in small companies, IT managers are not likely to embrace phones that operate over unsecured public networks like WiFi hotspots.

“Yes, employees will probably use [the F1000] -- until they get 'caught' by IT," maintains Jack Gold, head of research firm J.Gold Associates. "Many companies have used Skype internally for a long time, but it is not officially sanctioned by IT, for obvious reasons. So I don’t see why, with the low cost of Vonage, they wouldn’t put them in place in selected areas -- mostly groups doing their own thing. IT managers would prefer an enterprise solution (e.g., Avaya or Cisco), but these technologies are notoriously easy to get in place without IT knowing.”

All that said, the WiFi phones are likely to figure highly on wish lists for both mobile workers and small business owners in the coming year. Dealing with the security and coverage issues will simply be seen as a cost of doing business, until the next iteration in technology comes along.

“Certainly there will be some enterprise deployments [of the F1000], but it will mostly be small and medium-sized businesses and especially small-office/home-office firms," says Craig Mathias, principal analyst with the Farpoint Group. "Bigger firms need PBX integration, least-cost routing, CDR, etc. But I expect the overall cost of even enterprise VoFi [Voice over WiFi] to fall rather rapidly, so you should expect a whole bunch of innovative products here shortly."

— Richard Martin, Senior Editor, Unstrung

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