Netgear Takes Net Calling on the Road

The networking firm links up with Skype on a hotspot phone.
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As if Net calling weren't already a formidable challenge to the telco empire, suddenly mobile Skype threatens to remake the wireless landscape.

Though a bit late to the voice-over-Internet-protocol dance,

Netgear

(NTGR) - Get Report

has now found a huge high-stepping partner in WiFi calling, Luxembourg's Net calling giant Skype, a unit of

eBay

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. The two companies collaborated on a phone for Skype users that allows calling from WiFi hotspots without laptops or adapters.

Netgear's so-called super cordless phone essentially makes Skype's free calling service portable and decidedly more threatening to the conventional phone company.

"In the short term, it's the telco nightmare in its worse form," says American Technology Research analyst Albert Lin.

Netgear is expected to introduce the mobile VoIP phone during a press conference later Wednesday at the Consumer Electronics Show in Las Vegas.

Industry observers say the development puts Netgear at the front of the mobile Net calling pack, especially given the tens of millions of users Skype claims. Rival

Cisco's

(CSCO) - Get Report

Linksys

home networking unit makes phone gear for

Vonage

and has a mobile VoIP phone in the works for introduction later this year.

To date, almost all WiFi calling has involved a PC or laptop and a telephone adaptor. But Netgear's phone is one of the first to come loaded with Skype software allowing customers to log in for access their contact lists and make free calls to other Skype users. Callers can also use SkypeOut to dial people outside the network.

Of course while huge, mobile VoIP isn't exactly lights out for telcos yet.

Unlike cell phones, the super cordless phones only work within rather small WiFi zones or hotspots. These calling areas are typically limited to coffee shops, airports and a smattering of public areas today. But notably, several cities including Philadelphia and San Francisco have plans to install citywide WiFi networks.

"Players like Skype have been the big innovators, but this is mostly first-adopter type stuff," says ABI Research analyst Mike Arden. "A couple years down the road telcos are going to have to start worrying. Skype could start really picking off customers."

One of the defenses the telcos have at their disposal in the intensifying standoff between Net and phone networks is access, say analysts.

AT&T

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chief Ed Whitacre, for one, has taken issue with unnamed Internet players that peddle competing services over networks built and operated by the new Ma Bell.

"This raises the debate over how big a Skype can be," says analyst Lin. "We've already seen

Google

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show an interest in buying dark fiber," says Lin, referring to network capacity purchases to ease the search titan's dependence on telcos' networks.

Netgear plans to make the phone available in the coming weeks. Shares of the Santa Clara, Calif. tech shop were down 6 cents to $19.25 in midafternoon trading Wednesday.