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T-Mobile USA is late to the high-speed wireless party, but it's going low-cost to catch up.

While rivals such as AT&T, Verizon Wireless, and Sprint Nextel have been talking recently about building new 4G wireless networks, T-Mobile--which will begin offering 3G wireless service this summer--is leveraging cheap, unlicensed Wi-Fi technology to bring true broadband speed over wireless networks to some of its subscribers today.

There's no question Wi-Fi is far from perfect. Its use of unlicensed bandwidth can mean signal interference. And it's a short-range radio technology that will never be able to provide ubiquitous coverage. But when Wi-Fi is combined with a new 3G wireless network using phones that T-Mobile claims switch seamlessly between the two networks, it becomes an interesting story.

As the smallest nationwide carrier in the U.S. market, T-Mobile is using $4.2 billion worth of spectrum it bought in the Federal Communications Commission's 2006 Advanced Wireless Auction to build a 3G wireless network that operates in the nation's top markets. The service, expected to launch this summer, will be up and running in 80 percent of the top 20 markets by the end of the year, according to Joe Sims, vice president and general manager of broadband products and services for T-Mobile USA.

Even without 3G services, T-Mobile has managed to become a formidable competitor. And even though it doesn't offer specific e-mail or Internet surfing service over its cellular network, T-Mobile has still managed to become a leader in messaging with its popular Sidekick device that's used for SMS text messaging.

Now, as T-Mobile prepares to open its 3G network for business, the carrier has also begun offering a companion service using Wi-Fi that will provide even faster upload and download speeds for mobile-phone users. And while Sprint Nextel struggles to roll out WiMax and Verizon Wireless and AT&T talk about LTE (long-term evolution) deployments, T-Mobile will be able to offer its subscribers true mobile broadband service through Wi-Fi hot spots. The combination of its 3G network and Wi-Fi strategy could help the company compete more aggressively as mobile Internet and data become more important sources of revenue for wireless operators.

"WiMax and LTE are a ways off from becoming reality," Sims said. "There isn't anything faster than Wi-Fi right now. And with the seamless handoff to a 3G network, we can get much wider coverage."

Last summer, T-Mobile launched the Hotspot @Home service, which allows people using any of T-Mobile's dual-mode Wi-Fi/cellular phones to use their home Wi-Fi networks instead of the T-Mobile cellular network to make phone calls or access the Internet from their phones.

The company has expanded the service to also include its more than 9,000 public Wi-Fi hot spots in the U.S., giving its customers even more places where they can use Wi-Fi. I must admit, I have never used the service myself, but T-Mobile's Sims says the handoff between the Wi-Fi and the cellular is seamless, and subscribers can walk in and out of either network as many times as they like without ever noticing they have hopped onto another network.

Since the Hotspot @Home service launched nationwide last summer, T-Mobile has assembled an impressive list of devices that can be used with the service. Earlier this month at the CTIA trade show in Las Vegas, the company introduced the BlackBerry Pearl 8120 with Wi-Fi. T-Mobile also offers two other Hotspot@Home-enabled BlackBerrys, the popular Curve 8320, and the business-centric BlackBerry 8820.

Using the Wi-Fi network instead of the cellular network benefits T-Mobile, as well as its customers. For T-Mobile, Wi-Fi helps reduce the amount of traffic that is running on T-Mobile's own wireless network. And consumers get better in-home or in-building coverage. It also greatly improves the upload and download speeds for surfing the mobile Web. And at only $9.99 extra per month for subscribers who spend at least $40 a month on T-Mobile phone service, it's not an expensive add-on for high-speed data access and better coverage.

The service, which began selling nationwide last year, has been a big success, Sims says. It's even helped the company entice some customers to switch providers for T-Mobile.

"Over half of the @Home customers are new subscribers to T-Mobile," he said. "And most of them seem to be coming on for the faster speeds and the increased coverage proposition."

T-Mobile also recently announced a home phone replacement service called Hotspot @Home Talk Forever that also uses Wi-Fi. The service is currently available in Seattle and Dallas. Essentially, it is a voice over IP service, much like services offered by cable providers and companies such as Vonage. It allows people to use their regular phones to make and receive calls over a broadband connection. The service only costs $9.99 more a month on top of the regular calling plan and Hotspot @Home charge.

"Hotspot @Home is great for one device and great for improving in-home coverage," Sims said. "But there's another demographic that wants one permanent line in the home."

He admitted that the new service is an attempt to take on companies such as AT&T and Verizon, which offer wireless as well as home phone service.

"We are absolutely going after the traditional phone companies with these offerings," he said. "And we're doing it in a way that is relevant to our brand."

But Sims also says that T-Mobile's ambitions for Wi-Fi go beyond simply using it in the home. The service can also be used in conjunction with thousands of T-Mobile public Wi-Fi hot spots. The company currently has more than 21,000 public hot spots around the globe, with more than 9,000 of them in the U.S. While these hot spots by no means provide ubiquitous coverage, Sims said the company is evaluating how to expand its hot spot footprint to bring more Wi-Fi access to its subscribers.

Currently, most of T-Mobile's hot spots are in places like airports or cafes where people typically use laptops. But as more dual-mode phones come online, he said the company will evaluate where it might be useful to deploy hot spots for "nomadic" use.

Considering citywide Wi-Fi
He even admitted that the company has considered deploying Wi-Fi citywide. The movement to blanket cities with Wi-Fi was badly damaged last year when EarthLink, the largest Internet provider to offer such a service, decided to stop building these networks. Since then cities have been struggling to figure out ways to bring inexpensive Wi-Fi services to their communities.

T-Mobile could be the perfect candidate to build such a network. Not only does the company already have its own Wi-Fi networks, but the use of dual-mode devices that can switch between cellular and Wi-Fi networks would make the service more useful and appealing to nomadic city workers or even consumer subscribers looking for faster mobile Internet surfing.

"We've looked at citywide Wi-Fi," Sims said. "There's no real reason why it couldn't work from a technology standpoint. But there are different business models around using the technology in that way."

T-Mobile's service is already being used on some Wi-Fi-blanketed college campuses. The University of Texas at Austin launched a pilot program last month that will run through August and is allowing T-Mobile subscribers to use the university Wi-Fi network as part of their Hotspot @Home service. This means that in addition to using the @Home service in a dorm room, residents and faculty who subscribe to the T-Mobile service will be able to use it anywhere they can find the university Wi-Fi network, such as in the library, in classroom buildings, and in outdoor public hot spots.

The main reason the university is interested in allowing the T-Mobile service to be used with its Wi-Fi network is to provide better in-building coverage. The university currently is working with all the major cell phone carriers to improve cellular coverage on campus, but even with these efforts faculty and students complain of poor service inside many buildings.

Instead of investing in expensive femtocell technology, which uses a router-like device to boost cellular radio signals indoors, William Green, director of networking for the University of Texas at Austin, sees Wi-Fi as an inexpensive way to provide better coverage. At the same time, people in the university community with dual-mode phones can also benefit from the higher-speed network access using Wi-Fi.

That said, Green is skeptical that T-Mobile's Wi-Fi service could be as effective in a citywide deployment.

"Wi-Fi networks are very hard to manage in dense environments," he said. "And it's very hard for a city to deploy a network such as ours. We already own the fiber and all the rights of way."

Skepticism over Wi-Fi strategy
Indeed, other experts are also skeptical that T-Mobile's Wi-Fi strategy will find much traction beyond some niche applications. Roger Entner, vice president of communications for IAG Research, said T-Mobile has had little choice but to use Wi-Fi since it is so late to the 3G cellular game.

"They are trying to turn a virtue out of necessity," he said. "They're forcing a technology to be used in a way that it was not designed to be used. Can they get to it to work? Yes, but it doesn't work very elegantly."

At this point in the game, only time will tell. Sprint Nextel was supposed to have launched its Xohm WiMax service this month. But it now says it will launch the service later this year. And even though Nokia has announced one device to be used on a WiMax network, it will take awhile before more WiMax-enabled devices become available.

Then there's the other 4G technology, LTE. Verizon Wireless and AT&T have each said they plan to use wireless spectrum newly won in the 700MHz auction to build these networks, but it will be years before either provider offers a service on these proposed networks.

In the meantime, T-Mobile will be expanding its Wi-Fi hot spots and cell phone manufacturers will be embedding inexpensive Wi-Fi chips into more devices. So at least for the near future, T-Mobile, the laggard in the wireless speed war, could be the only provider to offer true wireless broadband speeds to its subscribers.

Coverage may not be everywhere, but it might just be enough to entice some subscribers to give it a second look.

WRTU54G T-Mobile-Linksys router

(Credit: FCC)

T-Mobile may be extending its Hotspot@Home service to offer voice over IP for fixed-line users.

The company is working with Linksys to make a router that integrates home phone lines into the service along with providing VoIP service over cell phones, according to recently filed documents with the Federal Communications Commission.

In June, T-Mobile launched its Hotspot@Home service, which allows T-Mobile cell phone subscribers to transfer calls seamlessly between the T-Mobile cellular network and a Wi-Fi hot spot in the home. The service is being offered for an introductory rate of $9.99 for a single cell phone. So far, it only supports two phones: the Samsung t409 and the Nokia 6086. Subscribers are also able to use the service with T-Mobile's more than 8,500 hot spots around the country.

With the Hotspot@Home service, subscribers get a D-Link or Linksys home router that is optimized for the service. The router also provides Wi-Fi service that can be used to connect PCs and laptops.

The way it works is that when subscribers are in the home and picking up a Wi-Fi signal, their voice calls use voice over IP technology to connect calls over the Wi-Fi network. And when they're on the T-Mobile network, the calls go over the traditional T-Mobile network.

According to the FCC documents, the new router, which hasn't been officially introduced, has two ports in the back that can be used to attach regular phones to the router. This would allow Hotspot@Home users to add regular home phones to the service.

The new router, which uses the moniker WRTU54G, also has two slots that support two GSM SIM cards. This would also allow users to add up to two additional cell phone lines.

If T-Mobile brings the router to market, it could put the cell phone operator in a much better position to compete with the two largest phone companies in the country, AT&T and Verizon. While T-Mobile has no fixed phone infrastructure in the U.S., AT&T and Verizon do. They also offer cell phone service, which they are bundling into larger packages of service. Cable operators are also offering home phone service using VoIP technology. And four of the major operators, including Comcast and Time Warner, are launching wireless service with Sprint Nextel. By extending the Hotspot@Home service to include regular home phones, T-Mobile, which is currently ranked fourth out of the top four U.S. mobile operators, could also offer a bundle of services to attract customers and keep existing customers from fleeing to other carriers.

This seems like a much more strategic use of VoIP technology than simply offering a standalone VoIP service, like Vonage is doing or like now-defunct SunRocket had been doing. Those services are simply a cheap replacement for regular phone service. But when residential VoIP is bundled with other services, I can see it appealing to more customers.

Representatives from Linksys and T-Mobile declined to comment on the new device. A Linksys spokeswoman said the company can't comment on unannounced products. So stay tuned for further developments on what T-Mobile might be up to.