Report: Beware of hype surrounding dual-mode phones

Dual-mode handsets that switch between a Wi-Fi and cellular network may not sell as well as some handset makers may have hoped, according to a new report published this week.

The research firm Ovum predicted in a report released Tuesday that by the end of 2010 only a little more than 2 percent of all mobile subscribers, or fewer than 5.5 million people, will have purchased dual-mode services. These services allow subscribers to automatically switch between a cellular phone network and a Wi-Fi network used in their home or in a public place like a coffee shop or airport.

"Equipment vendors have been fixated on dual-mode phones as the key form of fixed-mobile convergence," said Jan Dawson, the analyst who wrote the report. "But the people responsible for implementing this at the carriers are really skeptical that the devices and solutions are ever going to be ready for prime time."

Dual-mode services may be an especially hard sell in the U.S., where consumers are accustomed to getting low-cost plans with large buckets of minutes. So the need to conserve voice minutes by switching to a Wi-Fi network may not be compelling enough for most subscribers.

"We don't see a case for Wi-Fi phones being used for voice," said Jeffrey Nelson, a spokesman for Verizon Wireless. "We just don't think we should start with a solution looking for a problem that can be solved."

But some operators are pushing forward. T-Mobile in the U.S. is testing its dual-mode service that allows people to use their home Wi-Fi network in their house and the cellular network when outside the home. Several carriers in Europe, including Telecom Italia and Orange, have also been launching dual-mode services.

Dawson warns that mobile operators should focus their attention on other ways to tie wireless and traditional wireline phone services together instead of focusing exclusively on dual-mode services.

For example, carriers could allow customers to use a single identity for their mobile phones and their wired devices so that they have a single phone number, e-mail address, username and password. They could also allow wireless devices to provide remote access to wireline services. These services could allow subscribers to remotely program digital video recorders or check home monitoring systems.

The four cable companies working with Sprint Nextel have already been developing these services. Comcast and Time Warner announced public pilot programs in 2006. They, along with the other two companies, Cox Communications and Advanced Newhouse, will launch services this year.

Dawson said mobile operators risk being left behind unless they start incorporating more of these features into their services.

"Overall, it's time for a reality check and for carriers to move on to the forms of fixed-mobile convergence which have real potential for commercial launch," he said.

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