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Yahoo, Siemens Team on VoIP

People using Siemens's Gigaset cordless telephones will soon be able to make free phone calls using Yahoo Messenger with Voice, the companies announced Wednesday.

Siemens is planning to release its Gigaset M34 USB adapter in the third quarter, which will allow its Gigaset cordless telephones to make and receive free PC-to-PC voice calls using Voice over IP (VoIP) via Yahoo Messenger with Voice.

Calls from VoIP-enabled Gigaset phones to fixed-line and mobile phones will not be free but Siemens promises a "cost effective" calling service.

VoIP software processes voice transmissions into data that is passed over the Internet the same as e-mail and file transfers. VoIP services typically offer significantly reduced rates and more capabilities than standard phone service plans.

VoIP continues to gain traction in both business and home use. A recent study by Infonetics Research predicted that VoIP service revenue in North America will grow 18-fold between 2004 and 2009, from $1.24 billion to $23.4 billion. Further, more than $62 billion will be spent on VoIP services over the five-year forecast period.

"VoIP subscriber growth is skyrocketing right along with revenue growth. We're forecasting triple-digit growth from 2005 to 2006, with 6 million new subscribers a year every year from 2006 to 2008, when there will be over 24 million," said Kevin Mitchell, principal analyst of Infonetics Research and author of the report, in a statement.

Yahoo added voice to its Messenger application last spring, joining fellow Internet giants eBay, Google and America Online, all of whom now offer some sort of VoIP service to users.

Last year eBay spent $2.6 billion in cash and stock to acquire Skype, a company that pioneered the consumer VoIP market. It's estimated there have been about 53 million downloads of Skype software, which lets people use their PCs to talk to other Skype users anywhere in the world for free.

Google has "Google Chat" a voice-enabled instant messenger application, and there are rumors the company will release a "Google Phone" in 2006. America Online launched its "AOL Internet Phone Service" last April.

Elroy Jopling, research director at Gartner, said that he didn't think the Yahoo/Siemens deal was earthshaking news, but rather indicates that VoIP is increasingly becoming "a household word."

Asian countries are well ahead in the VoIP space. Samsung offers a digital camera to the Korean market that has a VoIP phone built in. Also in Korea, Ubistar offers a VoIP phone built into a memory stick that comes with a microphone and earphones. Users can plug it into any compatible device or computer to make calls.

"The big thing you will see in terms of numbers and VoIP is that the cable operators will garner a greater and greater market share," said Jopling. "They're at a point where they can continue to garner very lucrative customers."

"The market will eventually flatten out in that there will be three primary operators: cable providers, telephone companies, and a third group with a smaller, niche opportunity -- the Skypes, Vonages and Yahoos. But those secondary operators could shake up the market."

Joplin said that VoIP is just starting to move from the early adopters' stage to the point where it will appeal to a broad majority of users. He cited low cost as the biggest driver for VoIP adoption.

The Siemens deal follows Yahoo's announcement in January of Yahoo Go Mobile, a set of applications, including Yahoo Mail, Yahoo Messenger, calendar, address book, and Web search, which is preloaded on Nokia Series 60 mobile phones.

The service enables users to access these services via their Nokia Series 60 phones and also allows users to back up the data stored on their phones to Yahoo's servers.