October 15, 2004
New link for fixed, mobile phones

Is the fixed-line phone a dead duck? Look at the numbers and the trends, and you might well conclude that it is.

Mobile phones now outnumber fixed ones, and their numbers are growing fast, while the number of fixed lines is flat globally and declining in many countries. An increasing number of people, including five per cent of Europeans, are “cutting the cord” and going entirely mobile, doing away with their fixed lines altogether. {{more}}And while fixed-line phones have hardly changed in years, mobile phones have many handy features, such as the ability to store dozens of names and numbers, not to mention text messaging and other services.

Yet fixed-line phones do have their advantages. Calls are cheaper and clearer, and connections are much more reliable, as anyone who has trouble getting a strong mobile signal indoors will testify. Hence the current enthusiasm throughout the telecoms industry for the idea of “fixed-mobile convergence”, which uses clever technology to provide the best of both worlds: the freedom of mobile and the reliability and low cost of fixed lines. Subscribers use the same handset to make calls via fixed lines at home, and mobile networks when out and about: they have one number and one voicemail box, and receive one bill.

Behind the scenes, this involves some clever tricks. Calls are handled within the home by a small base-station plugged into a fixed-line broadband-internet connection. This base-station communicates with nearby handsets using radio technology that operates in “unlicensed” spectrum, such as Bluetooth or Wi-Fi (so you will need a new handset).

The base-station pretends, in effect, to be an ordinary mobile-phone base-station. As you enter your house, your phone “roams” on to it. When you make a call, it is routed over the broadband link, which has enough capacity to handle several calls at once by different members of the household. Calls made in this way are billed as fixed-line calls.

If you leave the house while making a call, you roam seamlessly back on to the ordinary mobile network. And when a friend comes to visit, her phone roams on to your base-station, but the charges for any calls made appear on her bill.

Winning back traffic

For fixed-line operators such as BT, Britain’s telecoms incumbent and one of the leading proponents of fixed-mobile convergence, the appeal of this approach is obvious: rather than losing out to mobile phones, fixed lines can now co-operate with them and win back some traffic. After selling off its wireless arm a few years ago, BT has re-entered the mobile market by reselling airtime on other operators’ networks; most recently, it has formed a partnership with Vodafone. A converged fixed-mobile service will enable BT to lower costs by shifting some mobile calls on to its fixed network; it will also allow the company to differentiate itself from mobile-only operators.

Saving money

So-called integrated operators, which own both fixed and mobile networks – such as Germany’s Deutsche Telekom and Japan’s NTT – also like the idea of fixed-mobile convergence. They can save money by merging network infrastructures and doing away with separate fixed and mobile divisions. France Telecom, for example, is reorganising itself into consumer and business divisions, rather than fixed and mobile. And Cingular, an American mobile operator owned by two fixed-line incumbents, BellSouth and SBC, is pursuing convergence as a way to improve coverage within buildings, and thus exploit fixed networks to gain a competitive advantage over other mobile operators.

Even mobile-only operators are getting involved, and making deals with fixed-line providers. Fixed-mobile convergence could help them fill the excess capacity on their 3G networks, and enable them to unload calls on to cheaper fixed networks where possible, to reduce costs. In short, everyone in the telecoms industry seems to like the idea, because they hope it will expand the market overall. Once people get into the habit of carrying their mobile phones around with them at all times, even in the home, they will probably make more calls. Vendors love the idea too, notes David Brown of Motorola, the world’s second-largest mobile-handset maker, because as well as requiring lots of back-end equipment, fixed-mobile convergence presents the opportunity to replace a billion or so existing fixed-line phones.

It all sounds great, which explains why the idea of fixed-mobile convergence has been around for several years. But it is only now gaining any traction. One reason, says Niel Ransom of Alcatel, a telecoms-equipment maker, is the success of mobile phones: fixed-mobile convergence only makes sense if everyone has their own handset, which they now do, in the rich world at least. It is also now possible to cram multiple radios (one for mobile use and one for use within buildings) into a single handset without adding much to its cost or size. But perhaps most important of all is the emergence of technical standards.

Agreed standard

This month a consortium of operators and suppliers, including Alcatel, BT, Cingular, Ericsson, Motorola, Nokia, Nortel and T-Mobile, announced specifications for integrating wide-area mobile with short-range Bluetooth and Wi-Fi networks. An agreed standard means that operators can proceed without the risk of being locked in to a particular technology.

Most observers agree that BT is the operator to watch. In July it co-founded an alliance of operators called the Fixed Mobile Convergence Alliance, the other members of which include NTT, Brasil Telecom and Korea Telecom. BT’s trailblazing fixed-mobile convergence technology, known as “Bluephone”, is being developed by a seven-company consortium that includes Alcatel, Motorola and Ericsson, and is being closely watched by other operators.

“If I go anywhere in the world, and talk to any operator, they want me to tell them about Bluephone,” says Ransom. “They’ve all got their eyes on it, and they will all be watching BT very carefully to see how this works.” Now that technical standards have been agreed and handsets are becoming available, BT expects to start trials of Bluephone in December, in preparation for a launch next spring.

Taken from the Economist, October 8.