No 2G required: TextNow launches the U.S.’s first VoIP-only mobile phone

Don’t let the name fool you. TextNow aims to be a lot more than just another over-the-top texting app, and on Tuesday its demonstrated its true ambitions by becoming the first in the U.S. to offer an IP-only voice service over a smartphone, beating its virtual operator rival FreedomPop to market.
TextNow began selling refurbished versions of the Samsung Galaxy S II ($120) and Nexus S ($90), both with their standard phone features disabled. In their place is TextNow’s voice and text app, which lets you make VoIP-based calls and send IP SMS just as you would on a normal mobile phone. TextNow is a mobile virtual network operator (MVNO) on Sprint(s s), but instead of buying bulk minutes and messages from its carrier partner, it’s sending all traffic over Sprint’s 3G data network.
TextNow Galaxy S IIThe advantage to this approach is much lower costs. For its baseline service TextNow is charging $19 a month, which includes 500 MB, unlimited texting, unlimited inbound calls and 750 minutes of outbound calls. TextNow assigns you a standard telephone number, making the service look like any ordinary phone to outsiders – think Vonage on a smartphone – but sticking to its OTT roots, all calls to other TextNow users are free.
In truth, the service is TextNow’s standard OTT app featured front and center on a dedicated smartphone with an access plan included. When Derek Ting, co-founder and CEO of TextNow’s parent company Enflick, gave GigaOM a preview of the smartphone strategy in June, he explained that TextNow has always targeted younger consumers who couldn’t afford — or simply didn’t want — to pay for a monthly mobile service plan. Consequently the typical TextNow customer uses its app to connect devices like the iPod Touch(s aapl) or tablets with no mobile connection.
Derek Ting - HeadshotTextNow felt that those customers didn’t just need an app they could use on Wi-Fi but a full-bore mobile service that took advantage of IP communications to offer cheap voice plans. It started out selling a 3G Wi-Fi hotspot that could connect customers to the wider mobile network, but its ultimate goal was to offer phones following that same principle. That’s why TextNow is targeting older Android smartphones and refurbished handsets, Ting said: Not only can it offer a cheap service, but cheap devices as well.
Ting sent me one of its Galaxy S II’s so I could test the service out for myself, and I have to say it worked it lot better than I thought it would. I live in Chicago where I was able to access Sprint’s WiMAX network (both phones support it), and found the voice quality to be just as good as a regular mobile call. SMS went through without a hitch and there was no delay receiving messages. Even when I found myself in 3G coverage, I had no trouble making or receiving calls, though I did find that the setup time for connecting calls increased substantially.
TextNow isn’t the only company with an all-IP mobile strategy. Mobile broadband MVNO FreedomPop has promised to deliver its own VoIP service this summer using Android phones and its unique freemium business model. MetroPCS has been supporting VoIP on its LTE systems since August, augmenting its traditional 2G network (though that service will quickly disappear as customers migrate over to T-Mobile’s(s tmus) GSM network), and the all of the major carriers plan to offer voice-over-LTE (VoLTE) in the next few years.
The difference is that the major carriers aren’t necessarily using VoIP to make their services cheaper. They’re tapping VoIP to make more efficient use of their networks and build new IP communications features around their core voice services.