SMS provides gateway to VoIP

But some major operators attempt to block it

Two emerging service providers — Raketu and Rebtel — are borrowing a model used by discount calling card companies to bring VoIP to wireless networks. Both operators are focusing on the international market, offering rates ranging from free to two to six cents per minute. And like the calling card companies, they are using local access or toll-free numbers to connect to their VoIP networks — but they have added a twist that is unique to cellular.

Both companies have incorporated short message service (SMS) into their features. Raketu allows a customer to send a text message to a local number, with the international number the customer wants to call embedded in the message. A server then initiates a call between the customer and the international number, dialing both numbers simultaneously and connecting the call via its VoIP network.

So far the service has less take-up in North America than in Europe, where the service originally launched. Greg Parker, CEO of Raketu, attributes the disparity to Europe's high international calling patterns. “In Europe they travel quite a bit,” Parker said. He added, however, that “in the U.S., it's becoming a fairly significant business.”

Raketu and Rebtel target customers include immigrant communities in the U.S. — particularly from Mexico, Central and South America. “These people could be legal or illegal, but they live here in the U.S., and they want to call home,” said Greg Spector, co-founder of Rebtel. “VoIP is a great way for them to call, but most of them don't have access to a PC. Most of them do have access to a cell phone, though.”

Rebtel also uses text messaging to initiate calls, but rather than using SMS to initiate the session, Rebtel uses premium SMS as a delivery mechanism for specialty phone numbers. A customer can text Rebtel's special short code with the international number he or she wishes to call, and Rebtel will send a message back embedded with a local phone number that, when dialed, will connect to the original international number. Rebtel has launched the service in Asia and Europe, but its efforts in the U.S. have been hindered by mobile operators.

As a premium SMS-based service, Rebtel has to get its short-code campaign approved by the individual operators. While AT&T and Sprint were willing to work with Rebtel, Spector said, Alltell, T-Mobile and Verizon Wireless all rejected Rebtel's application. “There are short-code campaigns ranging from Burger King to Barack Obama, but for some reason they're threatened by our campaign,” Spector said.

Rebtel and other international VoIP companies could be caught in a turf battle. While international calling has never been a big business in wireless, it is a growing one, as evidenced by the market-specific international calling plans many operators have begun to offer. As domestic voice margins decline, international calling may be one of the few areas where operators can still collect a healthy premium on minutes.