[June 01, 2006]

Wireless networks: Home fixtures

(Total Telecom Via Thomson Dialog NewsEdge)Alternative operators in Europe hope new voice over WiFi services will start the exodus of customers over to their unbundled deals. In France, the second and third largest ISPs are betting that there's nothing more attractive than free calls.

These services, launched in the past two months, show that the altnets are ahead of the game with WiFi strategies. But there are signs Europe's incumbents are starting to hit back.

In April, BT teamed with wireless hotspot company The Cloud to fit some 500 payphones in nine cities with WiFi boxes. BT is also one of several operators offering homezone wireless services. Then last month France Telecom announced it will launch a dual-mode phone, giving users an unlimited calling plan across Orange mobile and home wireless networks.

The Cloud last month launched its own voice over WiFi service, and plans to charge customers 11.95 per month for unlimited access. And in April, Vonage signed a deal to enable its customers to make VoIP calls over The Cloud's 7,000 hotspots in the UK; monthly Vonage packages start at 7.99 and it offers a WiFi handset for 89.99.

But it is France where altnets have made the boldest moves, says Stephan Jay, a consultant at bmp. "There's so much greater potential (in France) to build nationwide," he says.

ISPs Free and Neuf Telecom are encouraging their subscribers to build their own WiFi-based mesh networks with the latest version of their set-top boxes.

In keeping with France's cut-throat broadband pricing, WiFi-equipped set-top boxes will enable customers of unbundled services to make unlimited VoIP-over-WiFi calls in France, and potentially to other countries, at no extra cost.

Free charges an initial activation fee of EUR9.99, then includes the service in its standard Internet and national and international flat-rate voice bundle, which costs EUR29.99 per month. Neuf does not have a set-up fee, but charges the same per month for its similar bundle.

Free openly says it is targeting mobile operators, one of which admits subscribers make 40% of calls from home.

The loss-leading services are a gamble.

But Neuf's CEO, Jacques Veyrat, says "churn drops to around the rate at which people move house" once the line is fully unbundled.

"It's anti-churn without significant risks," says bmp's Jay.

Certainly, both French companies are looking for ways to drive up the number of subscribers that opt for unbundling. That would hurt France Telecom's fixed line rental business. Currently, 1.1 million (70%) of Free's 1.6 million customers have unbundled access, and the company hopes to see that grow to 75% by the end of this year.

Subscribers wanting to use the new services will need either a WiFi-enabled phone or a dual WiFi-GSM handset. Free will distribute dual-band phones from September, for approximately EUR200 each, but Neuf will not retail handsets.

As homezone-style services, the free call offer could prove tempting to customers. But some say the problems might arise when such services attempt to become more mobile.

"(About) 40% of calls are made from home, (so) there is a risk of transferral," says a senior manager from one of Europe's largest mobile operators, "but it's a question of ease of use." If mobile call bundles are cheap enough, why would subscribers want the bother of switching between WiFi and GSM services if they leave the home zone, he asks.

"Any calling card or payphone can give the same" cheap call tariffs, without the need for a new handset, adds John Strand, chief executive of Strand Consult.

Neuf has signed an agreement with Fon (Total Telecom, March 2006, p.14) to provide roaming beyond its own set-top boxes and France's borders. Neuf customers with compatible WiFi set-top boxes will be able to make calls from each other's hotspots, as well as those of Fon, which has 32,000 hotspots, 2,500 in France.

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