VoIP Startups Go Mobile

— August 02, 2006

The rules of engagement in Internet voice are shifting again as five startups take the bull's eye off fixed-line phone companies and place it squarely on the backs of mobile operators. Jajah, RebTel, MINO, Switch-Mobile, and MobileSphere all offer ways for mobile phone users to bypass expensive mobile calling plans and route international calls to the Internet, where they can cost just a few cents.

VoIP had long been an option for fixed-line subscribers, but cell phone operators had previously existed in an unassailable cocoon where they competed only with each other. Now mobile VoIP is attracting partners and making waves.

MINO is building relationships with service providers in much of Asia, particularly in China . Jajah, RebTel, and Switch-Mobile have targeted Europe and the United States ; though because of size and resource limitations, they are unlikely to begin competing with each other for at least another year or so. It is a brand-new market with a lot of moving parts. But it is a market with immense pent-up demand, particularly among the world's expatriate populations.

With $10 million in its coffers, Jajah has received the largest infusion of VC investment. The Menlo Park, California-based company (which recently moved its headquarters from Austria ) offers consumers a software download for their cell phone that reroutes mobile phone calls to the Internet. MINO of Sunnyvale, California, is unique in that it reroutes calls using the mobile operators' data plan rather than calling minutes. The company has attracted $1.5 million from U.S. and Asian investors.

New York City-based Switch-Mobile, which is currently seeking VC investment, takes advantage of its location in the home of the United Nations headquarters to target expatriate communities and businesses. Boston-based MobileSphere offers heavily discounted mobile long-distance calling in niche markets like colleges. In the last year the company began offering its services to mobile virtual network operators (MVNOs), which resell mobile services it buys at wholesale prices from network operators.

The market for VoIP international mobile calls is still so new that none of the five companies has established solid beachheads in any of their target markets. Remaining hurdles include building relationships with telecom service providers around the world and making their software compatible with the numerous operating systems and proprietary phones in the marketplace.

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