04:48 PM

EarthLink To Offer Wi-Fi Handsets

The company is beta testing the phone in Anaheim, Calif., and plans to make it generally available in the summer.

EarthLink on Tuesday launched a beta test of a Wi-Fi phone the company plans to offer as part of its overall Internet telephony strategy, which includes building wireless municipal networks.

The phone, built by Accton Technology, is part of the Internet service provider's push into the emerging market for making calls over the Internet through a wireless broadband connection either at the home or in areas where Wi-Fi is available. As part of that initiative, EarthLink has been building municipal Wi-Fi networks. The company is working on a project in San Francisco with Google, and has built networks in Philadelphia, New Orleans, Anaheim, Calif., and Milpitas, Calif.

EarthLink is beta testing the Accton phone in Anaheim, and plans to make it generally available in the summer. The phone would be an additional cost to the ISP's Internet telephony service, which costs $14.95 a month for 500 outbound domestic minutes, and $24.95 a month for unlimited time. Inbound minutes are at no charge. The phone, which includes a cradle that acts as a charger and a Wi-Fi router that plugs into a home broadband connection, would cost $100.

EarthLink said Tuesday that the phone and service could be used as a less-expensive replacement for traditional telephone service in the home. In cities where EarthLink provides municipal service, the phone could act as a wireless handset, which could save minutes on a person's cellular phone plan. The phone also could be used to make Internet calls over any Wi-Fi hotspot, such as those found in cafes and airports.

EarthLink believes the number of phone subscribers will grow as it adds more public networks. "What we have is an out-of-the-box, inexpensive alternative to cellular products," David Elgas, director of product management for voice over Wi-Fi at EarthLink, said in an interview.

Wireless Internet calling has a market, but it's fairly limited, said Avi Greengart, an analyst at Current Analysis. There are few municipal networks, and for most people to take advantage of the service outside of the home, they have to be near a Wi-Fi hotspot, which won't always be available. The cellular-phone alternative is more useful in corporate or university campuses that are covered by a Wi-Fi network. Internet telephony "could be a threat to cellular phones, but it's really a long-term threat, if a threat at all," Greengart said.

EarthLink also faces the challenge of competition. Cable companies, and some telephone companies, also are offering similar services, along with Internet telephony service providers such as Vonage and Skype.

Nevertheless, Atlanta-based EarthLink, which started as a narrow-band service provider, is focusing heavily on Internet telephony, as well as broadband and providing cellular-phone service. In the latter area, the company last May launched Helio, a joint venture with SK Telecom Co. Helio, however, lost $35.7 million in the fourth quarter of 2006, which contributed to EarthLink's overall net loss of $24.8 million. The company's overall revenue, however, increased 5% to $328.2 million, as it added 29,000 broadband subscribers, including 12,000 voice subscribers.

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