Although telcos are used to being the only major players for voice services, they'll soon have to change their business models to compete with such upstarts as Skype and Google, said panelists at this week's VON conference in Boston.

During a panel on the future of telecommunications profitability, panelists from an array of industries noted that the telcos' dominance of telecommunications services is coming under assault from Internet companies interested in getting into the voice market. The biggest potential new player in the market could be Google, they said, which has long been rumored to be developing a "GPhone" mobile device on par with Apple's iPhone.

"Everybody's watching what Google's doing," said Michael Finn, the telco consumer services lead for Microsoft. "They're hinting at playing a part in every single area of wireless communications. They're looking at bidding on mobile spectrum, and they're talking to some ODMs [original design manufacturers] in Asia about making mobile devices."

The panelists pointed out several ways for telcos to raise additional revenue to keep up with competitors, particularly with regard to adding advertisements to their telecom services. Oscar Rodriguez, the CEO of IP Unity Glenayre, said that telcos could take a lesson from Google on how to develop advertising content that blends in seamlessly with mobile device display screens and that does not needlessly intrude on customers' communications. "You can't just blurb advertising everywhere," he said. "You need . . . to get advertising to be not quite subliminal, but to certainly be unobtrusive. Google does a good job of putting their ads up in the corner of the screen, and they've made clicking on the ads a choice for the user."

Martine Lapierre, the vice president for strategic marketing at Alcatel-Lucent, said that telcos might have more difficulty putting ads on their phone display screens because mobile and fixed portals have so much less space than search engines. One alternative business model, she said, would be to have companies "sponsor" individual telecommunications, much as companies sponsor radio and television programs.

Greg Pelling, the CEO of CounterPath, said that there are also major opportunities for telcos to raise revenue creatively through SMS. "In China, there are 12 billion text messages sent over a five-day period during New Year celebrations," he said. "China Mobile has come up with an idea of creating a special dancing character that they charge half a penny for people to attach to their SMS to celebrate the Chinese New Year, and to personalize their message. The thing that we're missing out on is . . . I don't know of any organization that's building anything unique for SMS."

The panelists also discussed the impact that the iPhone has had on the market for mobile devices. Chris Mankle, the chief technologist for HP, said that what made the iPhone such a hit wasn't one killer app, but several small features that made it a worthwhile experience for consumers. With such a wide range of options for e-mail, visual voice mail, SMS, Web browsing and Wi-Fi connectivity, Mankle said that the iPhone let users personalize their experiences to meet their own personal preferences.

"From HP's standpoint, we look at Apple and we say, 'Well they really nailed that, now what can we learn from it?'" Mankle said. "It all comes down to making everything more personal for users."

IP Unity Glenayre's Rodriguez said he agreed "100%" about the importance of personalization, and added that delivering personalized local services would be the best hope for small carriers to compete with the major telcos. "You know your own locale well and are in tune to what's happening there every day," he said in response to an audience question about small carriers' ability to compete locally. "You know all the businesses that are local, and you know the people's wants and needs on a local level. The advantage you have is that in the United States, we're broken down into a series of locales -- we're not just one public."