Wireless VoIP held back by handset costs

A new study suggests it will be a number of years before Wi-Fi phones, supposedly a revolutionary telephone technology, manage to fulfil expectations.

Analysts at Infonetics Research say portable phones using Wi-Fi, the popular technology that creates 100-metre zones of high-speed wireless connectivity, are taking hold in hospitals and businesses, but worldwide sales were negligible last year.

The results are disappointing. After years in development, the much-anticipated devices were supposed to take off in 2004. But with just 113,000 such handsets sold last year, or $45m in total sales, it's apparent the prognosticators were wrong. Rather, the sales "represent a market at its birth". as Infonetics analysts put it.

Wi-Fi phones combine two potent technologies - Wi-Fi and voice over Internet Protocol (VoIP) software, which lets internet connections double as extremely inexpensive phone lines. Typically, VoIP subscribers use a wired phone line, whether a single home phone or any number of phones in an office setting. But many service providers see an opportunity to create wireless versions of their services using Wi-Fi. Introducing the appropriate VoIP services and technology could turn hotspots into giant phone booths.

But it could take at least until 2009 before the cost of Wi-Fi phones drops enough for a mass market breakthrough, according to Infonetics.

Richard Webb, Infonetics directing analyst, said in a statement: "Voice over wireless internet devices have the potential to be a hugely disruptive technology. As VoIP goes wireless, this will present a challenge not only to fixed line operators, but to mobile operators."

Ben Charny writes for CNET News.com.