Update: T-Mobile merges Wi-Fi, cellular

T-Mobile USA is tapping into home broadband to give cellular customers a better deal.

Subscribers to a new service from the Seattle-based mobile operator will be able to make unlimited U.S. calls via Wi-Fi at home and on Wi-Fi networks that don't require a password. Using the same phone, they can leave the range of the Wi-Fi network and keep talking without an interruption as the call shifts over to the T-Mobile cellular network.

The service, called HotSpot @Home, is on the cutting edge of what some observers believe is the future of telephony. It lets users have just one phone and in many cases get better coverage indoors than they do with a pure cellular service. When it comes to high-bandwidth services such as video, Wi-Fi can give a performance boost where it's available. For the operators, it makes more efficient use of expensive cellular capacity and can be part of a "quad-play" service that includes voice, data, video and mobile service.

T-Mobile has launched a site to promote the service, which so far is available only at 24 stores in the Seattle area. The service costs $19.99 per month on top of a voice plan priced at $39.99 or higher.

The carrier so far offers a choice of just two dual-mode cellular/Wi-Fi phones for the service: the Samsung Electronics T709 and the Nokia 6136. Both cost $49.99 after rebate with a two-year contract and $99.99 with a one-year contract. T-Mobile also provides a home Wi-Fi router free of charge after rebate for users who sign up for a one-year or two-year contract. Those routers, made by either Cisco Systems' Linksys division or D-Link Systems, are optimized for VOIP (voice over Internet Protocol), said spokesman Tom Harlin.

When a subscriber making a call comes home or enters a T-Mobile Wi-Fi hotspot such as a coffee shop, the call will be automatically shifted on to the Wi-Fi network, Harlin said. The service will work with any standard Wi-Fi router connected to a home broadband connection, he said.

T-Mobile, which has lagged bigger carriers in 3G (third-generation) mobile data and was an early deployer of Wi-Fi hotspots, had been expected to pioneer dual-mode mobile service in the U.S. But some observers believe the other big operators will be forced to follow.

"They can't afford not to," said Ellen Kirk, a telecommunications consultant at Logistix, in New Orleans. Consumers will demand the savings, and carriers will deliver the technology to prevent losing customers, she said. But technology challenges remain, she said, especially handset battery life and smooth handoffs between networks.

Verizon Wireless has no plans for a dual-mode service because it doesn't see a need for it today, spokesman Jeffrey Nelson said. It is studying the technology but doesn't think it's ready, Nelson said. In the meantime, it is using other tools to improve indoor coverage where needed, he said.