Mobile communications provider O2 will next year offer indoor, low-power GSM base stations connected via broadband as part of its fixed-mobile convergence (FMC) strategy, an approach that will let customers use standard mobile phones in the office.

Rival Wi-Fi-based FMC solutions require expensive handsets that have so far been plagued by low battery life, call handover issues and potential interference problems caused by other Wi-Fi devices.

“We can take ADSL and build out to a cell site, or else put the radio into the home or office,” said Dave Williams, chief technology officer for Telefonica-O2 Europe at last week’s annual O2 strategy briefing in London. “Long term, we’re looking at building in 3G/GSM rather than Wi-Fi.”

Williams showed off a prototype picocell box that combines the functions of a domestic DSL router and a GSM base station, which O2 said could cost less than €100 (£68) when it ships next year. The technology is still in development, and O2 is looking for customers to take part in trials.

Mobile calls made within range of the customer picocell would still need to be converted to voice over IP (VoIP) calls before being routed via the broadband connection for customers to save money on their mobile bills.

Analysts debating FMC at a recent NetEvents technology forum predicted that companies might use private GSM in the short term while waiting for better dual-mode Wi-Fi handsets.

“The point is, users feel comfortable using their existing 2G phones, so using those with a PBX extension could be the sweet, simple solution right under our noses without any of the complexity of having a WLAN, and at a relatively lower [deployment] cost,” said Richard Webb, directing analyst for wireless at Infonetics Research.

In contrast with T-Mobile, Orange and Vodafone, which have invested heavily in Wi-Fi hotspots across the country, O2 regards the HSDPA version of 3G as the best technology for mobile internet and data access. It plans to expand its coverage wherever there is demand, although Williams conceded it is likely to be two years before HSDPA becomes widely available.