Wireline Replacement: Coming to a Channel Near You

By Khali Henderson

Posted: 10/2003

Wireline Replacement: Coming to a Channel Near You
By Khali Henderson

Telular Corp. is enabling consumers and
enterprises to unwire with its PhoneCell product lines that emulate the central
office to provide wireless dial tone for home phones and PBXs. The company has a
growing dealer network among interconnects and now is seeking wireless carriers
to distribute its solution and allow them to replace wireline services.

In the United States, the wireless carrier is faced with
flat growth. Everyone that wants a cell phone pretty much has one. All you are
going to do is steal someone from your competition. So the carriers are looking
for opportunities to generate more revenue, more opportunities through existing
system, says Dan Wonak, senior vice president of marketing for
Telular, who notes camera phones and locationbased services are examples of
attempts to raise the average revenue per user. Another approach is replacing
wireline in the home and office. Thats where our products play quite nicely, he adds.

He says a consumer only need buy the PhoneCell unit from the
wireless carrier, disconnect the ILEC, plug PhoneCell into any RJ11 jack and all
the customers phones will ring over the wireless carriers network.

Wireline replacement is an increasing trend. Yankee Groups 2002 Mobile User Study shows only 3 percent
of wireless customers have gone completely wireless. While the Yankee Group
reports not everyone has cut the cord, the growing reliance on wireless phones
already has displaced 25 percent of U.S. landline phone minutes a number
that is expected to rise to 35 percent by 2004. PriMetrica Inc. reports about
half the households it surveyed in a recent study would call it quits on
landlines if wireless offered a competitive alternative price.

Several wireless carriers are on record as targeting wireline
replacement. Leap Wireless International Inc., which markets under the Cricket
brand, revealed results of a May 2003 survey showing 37 percent of Cricket
customers do not have regular phone service at home. This compares to 26 percent
in June 2002.

In his 2002 annual letter to shareholders, AT&T Wireless
Inc. Chairman and CEO John Zeglis laments 80 percent of calls still travel over
landlines. We in wireless can free those minutes and those unfortunate people
who remain tethered to wires and walls, he writes, noting this represents a
growth opportunity for the company.

Telular already is aiding carriers in Europe with similar
endeavors. Orange, for example, uses Telular products on the desktop and behind
the PBX replacing trunk lines to the outside world. You can put one of our products on the desk and they can
choose to go to the PBX, through an analog connection like a regular office
phone or directly wireless from their phone to the outside world, says Wonak,
who adds inbound traffic from a mobile sales force can ring back through the PBX
over wireless connections.

Another application with Vodafone Group plc is slightly
different. They use our products on the desktop, but they completely replace
the PBX, says Wonak. You can think of it as wireless Centrex.
With classic Centrex, a call goes through the central office even if its
destination is a colleague down the hall. Vodafone is replacing lines to the
central office and the wireless network now becomes the central office. Just
like with Centrex where you can dial a three-to-four digit extension to get to
the office next to you, its identical, says Wonak. Everyone is assigned
an extension even employees out in the field. They can be in a different
country, and you can literally dial your short code and be connected with them.

The benefit is less expensive phone calls and no need to lease
a PBX. There are no wiring costs. So if you move, there are no rewiring costs and if you need to
add extensions, you just move the desktop set.

Vodafone and Orange are using the SX5 PhoneCell, which is
GSM/GPRS compatible. A CDMA 1xRTT product is expected to be available by the end
of the year. There are two models a terminal and a desktop version that
retail for $499 (See photos this page). The terminal type is a small box like a
modem. It has an antenna that can be placed remotely for a better signal. It
connects to any home phone, cordless phone, speakerphone, fax machine or PC
modem with an RJ11 connection. The desktop product looks like an office phone with a keypad
and a large LCD display. It accommodates many of the same functions you can do
with a cell phone, including maintain a phone book, log calls and send SMS
messages. SMS already is popular in the United Kingdom for fleet service
and other applications. PhoneCell accommodates a full-size keyboard to
facilitate SMS for dispatchers and other power users.

Telular expects to announce at least one deal with a carrier
this year. The company says the model can be more of a partnership where Telular
handles the inventory and provides the equipment, paying the carrier a commission, or the carrier may become a value-added reseller, taking
possession of the products and marking them up. The margin range is at least 40
points, Wonak says.

The one thats likely to happen this year is a three-way,
Wonak says. We provide the products. One larger carrier provides the service. But the product is
going to be installed in homes by the nations largest security company.

In this scenario, Telulars solution provides wireless
backup for the alarm service as well as the opportunity for consumers to replace
their wireline voice service. The alarm company also plans to bundle in mobile
service allowing consumers to use their handset as a remote control for the
alarm system. This allows consumers to check that the alarm was activated
and, ultimately, be able to unlock the door for service representatives and
relock the door and rearm the system. Plans call for the application to
capitalize on 3G high-speed data lines to remotely monitor a security camera.

While Telular is cozying up to carriers, it continues to
cultivate a VAR network of interconnects that buy the product and resell on
margin. Telular also has inked deals with several wireless carriers AT&T
Wireless, Cingular Wireless and T-Mobile to provide the transport component
to dealers without contracts of their own. Partners would receive a commission
in the form of a discount on their equipment buy, Wonak says.

One of the companys newest channel partners is Unwired
Technologies Group LLC in Skokie, Ill.

The startup is a joint venture between interconnect Prime
Telecommunications and telecom agency SimpleComm Solutions Inc. formed with the
intent of creating a dealer network to address business continuity requirements.
The company is starting out representing Telulars solutions, but plans to
expand to other wireless technologies.

What we are trying to do is provide the endto- end solution
by using SimpleComm as the activation arm and Primes experience in the PBX
market to develop a plan for interconnects to go to market, explains Vic
Levinson, CEO for Unwired Technologies Group and president of Prime
Telecommunications.

He says the solutions might include a backup solution
consisting of a rack-mounted Telular unit or series of units. Another option is
called dial tone in a box whereby Unwired Technologies Group has a
custom-configured Telular unit in a transportable box that can be deployed
rapidly for temporary use, such as an office for a claims adjuster serving a
natural disaster or as an employment office at a new construction site (See
photo at left). A third plan is backup service for an interconnects
maintenance customers.

In contrast to Telulars wireline replacement push through
carriers, Unwired Technologies is positioning the solution for backup use. Peter
Fitzgerald, a wireless industry veteran and president of Unwired Technologies
and SimpleComm, says two primary reasons for this is that there is still price
compression in landline services and no comparable voice quality over the air.
They [wireless carriers] are never going to get to comparable voice quality
64kbps TDM-based calling with 8kbps call processing rates, says Fitzgerald. Our ear can tell the difference.

Since it started in June, Unwired Technologies has hired two
business development managers to assemble its dealer network beginning with
interconnects in northeastern Illinois. If successful, the company plans to
expand further into midwest Illinois cities and to begin working with wireless
retailers for consumer deployments and pairing them up with its interconnect
partners for enterprise installations.

Unwired Technologies will provide vendor certification courses
and tier-one support. Partners stand to gain the hardware margin plus activation
commission one-time through SimpleComm plus professional services fees.