Company profile: Truphone

Once upon a time, the only way to make calls on a cellular phone was via a cellular operator, most probably the one that gave you the phone. However, recent years have seen a revolution in the mobile industry and, while traditional operators still dominate almost the entire market, a few upstarts have begun to disrupt the status quo.

One such company is Truphone, a London-based internet telephony (VoIP) firm which, unusually, started life on an organic farm in Kent, yet which found itself praised as a "Technology Pioneer for 2007" by the World Economic Forum last December. The brains behind the operation is chief executive James Tagg, who made a name for himself as one of the driving forces behind touchscreen technology after working on the original Psion organiser.

"I have a degree in physics and computer science and I did an engineering degree, after which I started a company called Moonstone," explains Tagg. "One of the products that we developed was a radio for the Psion organiser using modified mobile protocol. The biggest problem we had with the radio was that it was detuned by the presence of your hand, so then we hit upon the idea that we could make a touchscreen out of that radio technology."

As a result, Tagg owns several patents on the touchscreen integrated circuits he developed with co-workers including James Collier, who is himself now chief technical officer for wireless specialist Cambridge Silicon Radio.

Then, in the 1990s, along came the short-range wireless technology known as Bluetooth. In the early stages of its adoption by the mobile industry, Tagg says he found himself wondering why there was "lots of radio technology out there but very few services that used it". It occurred to him that, if technologies such as Bluetooth were to become a success, it would in effect create a new voice network ripe for exploitation.

In 2000, he tackled the idea in earnest. His company, Software Cellular Network Ltd (SCN), filed patents and got in touch with venture capitalists, only to have its dreams dashed by a crash in the stock market which hit the telecommunications sector particularly hard. The idea's revival, says Tagg, came when Nokia introduced Wi-Fi-capable handsets in 2004, complete with SIP (session initiated protocol) technology that made them suitable for VoIP.

Tagg saw an opportunity. "In 2005 we were looking for funding. We were a technology company, but got interest from venture capitalists who said 'why not turn it into a service rather than selling technology?' Then Skype got bought [by eBay], and within eight weeks we were offered over £8m," he recounts. In May 2005, Truphone was launched as "the world's first software-only network operator", with a free-to-download client that could be used on Nokia's E-Series handsets.

What Truphone does is route calls through the internet, using Wi-Fi instead of the phone's cellular capabilities. It is not the only client to do this — its best-known rival in that space would be Skype — but the company claims that Truphone is the only one to take an exclusively IP-based approach. Tagg estimates that Truphone currently has a few thousand subscribers in 80 countries, with about 40 percent situated in North America and 40 percent in the UK.

"We're a telco," says Tagg. "We charge for minutes and receive in-bound termination fees [the levies charged for connecting calls to a network] from carriers. We just use Wi-Fi rather than GSM."

Of course, the user will not always be in range of their work or home Wi-Fi network, so Truphone has...

...roaming deals with The Cloud and the free-hotspot.com network to let users connect while out and about. Tagg indicates that a similar deal with BT could be on the cards for its network of Openzone hotspots, but prices are still being negotiated.

"Within a year we will launch in about 14 European countries on a fairly low-key basis and then expand from there," says Tagg, adding: "The benefit of being internet-based is you can start in a lot of countries."

Tagg thinks that Truphone's client is set apart from its rivals by its ease of use. "Doing Wi-Fi is surprisingly hard to do right," he says. "The benefit is that we have been doing it for a long time. We hope the reason you use us is that we do it best."

"With the vast majority of VoIP clients, you have to feed all the parameters into the smartphone. The last time we checked, [a typical installation] took 270 key clicks. With Truphone it takes six key clicks, all of which are 'yes'."

Truphone also has plans to expand, and not just through interoperability agreements like the one recently inked with Google Talk. In the next quarter, the company will branch out beyond its current web-only strategy into retail stores, and it will soon offer its own SIM cards (and possibly handsets), although its operator partner in this venture has still not been announced.

In September, once its voice and SMS capabilities are "solid" enough, Truphone will start offering push-email for its business customers, together with "music and fun" for the consumer. Tagg is also keeping an eye on the long-range technology WiMax, which he thinks could offer great potential if used in conjunction with Wi-Fi, but he estimates that it will be at least two years before WiMax-native phones are available in any great quantity.

The big question, of course, is where the mobile industry will end up once companies like Truphone have taken a slice of the pie. "Given the huge number of cell phones and users, I don't see any prospect of wiping out the cellular operators," concedes Tagg, "But I am amazed how few services are provided on cellular phones. That's where the game is."

"If you think disposable income is going up, it is prospectively a very rosy world for the mobile industry," Tagg continues. "Cellular operators can go one of two ways. They can be a bitpipe and have a smallish number of staff and a very efficient network, or they can provide services and entertainment and not care about the network." He cites Virgin Mobile — a "mobile virtual network operator" (MVNO), which resells T-Mobile's connectivity — as an example of how to adopt the latter strategy, but claims that he does not think one strategy is necessarily "smarter than the other".