Fixed-mobile convergence is obviously the buzzword of 2006. Unlike the past when the industry throws out big ideas, it's going to happen this year in the form of roaming between cellular and WiFi networks on the voice and data side. What I'm interested in is what is going to happen in the U.S. market? Some analysts say FMC is a no-brainer in Europe because tariffs are high and FMC offers the opportunity to significantly lower the per minute cost in certain areas such as the home.
The U.S. market is a different dynamic, with big bundles of wireless and data minutes customers can pretty much use anywhere, providing a bit less incentive for offloading to unlicensed WiFi networks. In fact, we saw just last week that T-Mobile and Cingular are battling it out on the pricing front, with T-Mobile offering 1,500 minutes for $40 per month and Cingular offering 1,000 minutes for the same price.
Nevertheless, we know that T-Mobile, which owns thousands of WiFi hotspots, will offer FMC services as it lacks a 3G network. Sprint Nextel has said it will debut a WiFi/cellular phone that provides VoIP service through a home WiFi network in the second half of the year in conjunction with its cable partnerships. The integrated WiFi/cellular voice service will be available in seven undisclosed markets. Sprint has commented in the past that coverage is a major reason customers churn and WiFi can bridge the in-building coverage gap, especially in the home. Meanwhile, it appears FMC will be a strategy for Cingular, whose new parent, AT&T, owns quite a few hotspots. Cingular will have some spotty coverage when it comes to its HSDPA/UMTS network and the corporate customers to which AT&T drives to cater love cheaper phone bills. It already offers EDGE/WiFi on the data side.
The wild card then is Verizon Wireless. The operator has shunned WiFi for data access more than once, choosing to focus on expanding its EV-DO network, and analysts say it has spent millions on deals with laptop makers to integrate EV-DO. The CDMA carrier launched public WiFi service in 2003 with 1,000 hotspots, all of which were delivered through partnerships; but it decreased its WiFi footprint by 2004, citing for one a lack of consistent quality of service and limited coverage. And this past summer, Verizon decided to phase out its WiFi hotspot network in New York City and rely on Verizon Wireless to accelerate its deployment of EV-DO around the city.
Can Verizon stand alone by focusing on EV-DO or will it be forced to follow competitors? It's not like there is a bunch of pent-up demand for such a service. People aren't clamoring to throw away their landline phones in droves. And there are a number of roadblocks for wide deployment of FMC in the near future. Some of these include a wide availability of competitively priced/featured dual-mode handsets, higher power consumption requirements and probably most important of all, the complexity of managing the the entire quality of experience for the customer, which will be turned off in an instant if FMC services stink. Then again, coverage is always an issue for operators. You can be sure Verizon is watching the space closely. - Lynnette