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True, the big cable and phone companies will add VoIP and WiFi, too. Starting in 2006, SBC’s Cingular Wireless will offer dual-mode cellular/WiFi phones which will work as 3G wireless devices as well as connect to its growing FreedomLink hotspot business for data access.

According to Frank Hanzlik, managing director of the WiFi Alliance, all the cellular providers will follow T-Mobile’s lead in announcing plans to support hybrid phones that span both its cellular and WiFi networks.

“Forward-thinking companies like T-Mobile see that WiFi and 3G can coexist,” says Hanzlik. “They see that WiFi can provide some good benefit for offloading cellular capacity and provide better coverage inside buildings where it might be costly for cellular stations to reach.”

In the long run, IP-based systems should be cheaper to operate, saving the Bells considerable money. However, they’ll need to develop new services while simultaneously supporting their old packet-switched infrastructure even as price pressure from Vonage, AT&T CallVantage and Skype continue to push prices down.

If SBC, for instance, prices its residential VoIP similarly to Verizon VoiceWing’s $35 per month, it will beat cable’s even pricier offerings, but may have trouble competing with the $20 to $30 per month plans from the independents.

For now, the phone companies are banking that people will use VoIP as a second line, according to SBC spokesperson Destiny Belknap.

That may be a false supposition, though, as younger people are more willing to go totally cellular, perhaps with a cheap VoIP line for long distance calls at home. The phone companies may own big chunks of cellular providers, but they can never be sure their customers will defect to the right ones.

The genie is out of the bottle, so it’s better for the Bells that they catch some new customers than have them go elsewhere. And once the fiber-optic upgrades to support video are completed, they will be able to match cable in offering multi-service bundles over all-IP networks.

These all-in-one packages may ensure that the phone and cable companies will lead the way in VoIP, but with cellular and VoIP service competition, the pie is finally getting some new slices.

The VoIP independents can focus on IP-services and start adding value, bringing conferencing and other services into the home. Phone companies can do the same, but they may be distracted by their desire to get into video. In the meantime, there will be so many new angles in the mix, including an emerging industry standard for fixed wireless broadband called WiMax, that nimble competitors will find opportunities.

Even if shakeouts limit the number of major players, the disruptiveness of the technology will be of such magnitude that VoIP should act as a competitive force of its own, keeping prices low and accelerating the delivery of new services.

VoIP is never likely to be as lucrative a business as broadband access, but at least it’s a business that has a more level playing field.

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