ATandT VOIP Decision Benefits iPhone Users, but Leaves Questions

AT&T is now allowing iPhone users to place VOIP calls over its wireless network, instead of just Wi-Fi. Will the move jam up an already busy network - and force Apple and Google to play nice?

AT&T's Oct. 5 policy reversal offers something of a Catch-22.

While VOIP (voice over IP) applications on the iPhone were previously only possible over Wi-Fi, AT&T announced it had taken steps to enable VOIP applications on the iPhone to run on its wireless network.
"iPhone is an innovative device that dramatically changed the game in wireless when it was introduced just two years ago," said Ralph de la Vega, president and CEO of A&T Mobility & Customer markets, in a statement. "Today's decision was made after evaluating our customers' expectations and use of the device compared to dozens of others we offer."
Struggling to deal with the unprecedented data traffic coming from iPhone users enjoying their exclusive-to-AT&T devices, however, the carrier has been panned for slow service and dropped calls. So while the VOIP decision will surely please some customers, it may exacerbate the troubles of others.
Ken Hyers, an analyst with Technology Business Research, says the decision may have been motivated by a desire to stay out of the Federal Communications Commission's spotlight.
"I think this is simply something that was less important to them," Hyers told eWEEK. "None of us are certain, but it seems it was more of an Apple issue than an AT&T issue."
The decision is also a win for Skype. On March 31 the company announced it was offering a free app that offered Skype calling and instant messaging to iPhones and second-generation iPod touch devices, with a compatible headset and microphone. In two days, the application was downloaded more than 1 million times. AT&T, however, blocked its use over its 3G network, fearing for its bottom line.
"We applaud today's announcement by AT&T to open up its 3G network to Internet calling applications such as Skype. It is the right step for AT&T, Apple, millions of mobile Skypers and the Internet itself," said Josh Silverman, president of Skype, in an Oct. 7 statement. "Nonetheless, the positive actions of one company are no substitute for a government policy that protects openness and benefits consumers and we look forward to further innovations that will enable even more mobile Skype calling."
On Oct. 5, Vonage also got into the act, with the introduction of Vonage Mobile, a free VOIP app in the Apple iTunes store that offers low-cost international calling. It works over cellular and Wi-Fi networks on the iPhone, over Wi-Fi on the iPod touch and over cellular networks on BlackBerry smartphones.
Analyst Roger Kay, president of Endpoint Technologies, says AT&T is responding to pressures.
"They're not doing this because they think it's a good idea," Kay told eWEEK. "From Apple's point of view, all it does is make the hardware more popular. From AT&T's point of view, they're forgoing revenue, but they're holding on to a franchise. It's not a comfortable spot for AT&T to be in, but they're doing what they can."
Kay says the decision was also interesting in regard to Google. Google's Voice app was controversially rejected by the Apple App Store, and AT&T has told the FCC that it believes the app enables Google to break network neutrality laws.
"Apple's afraid of Google, because Google has the potential to get the eyeballs and dollars of Apple's clients," said Kay. "Apple should cool it, though, because it doesn't look good for them. Their business is selling hardware. Google makes money on advertising. ... There's no reason they can't live in the same ecosystem."
As for the additional burden to the AT&T network, AT&T has been frantically building it out, and while it's not yet finished, Kay offers that AT&T may have reached a point where it believes the network can better sustain the additional VOIP traffic.
"The same way AT&T is forced to accept VOIP, Apple will be forced to accept Google on its platform," Kay added. "End users want this stuff, and there's a tendency for things to go that way. "
Charles King, principal analyst with PundIT, agrees.
"It's not uncommon to see companies try to preserve their proprietary interests. But when the realities of the market come in competition with corporate self interests, corporate self interests tend to fall by the wayside," King told eWEEK.
Does this mean Google Voice may find a home in the App Store after all?
"They may, but it'll be only when they have no other recourse. I'd see them continuing to resist Google until they have absolutely no other choice."