Nokia, the leading handset maker, has been a favorite of ours for two reasons –- it ruthlessly promoted and added Wi-Fi connectivity to its handsets and added VoIP functionality to its devices.

Carriers did not view these technology developments too kindly since it prevented them from extorting exorbitant amounts of cash for costly long distance connections, leading to the rise of mobile-VoIP players such as Truphone, Fring and Gizmo Project.

But now the Finnish giant seems to have developed cold feet, and some of its new handsets, such as the new N78, are not VoIP compatible anymore. Many of these phones are not on the list of Nokia’s VoIP compatible handsets. A reader tipped us off about this apparent change in the latest N-series phones.

…the N78 (and also to affect the forthcoming N96) which is that Nokia has very quietly and seemingly sneakily redacted their built-in VoIP / SIP implementation in all phones that come with Symbian Series 60 3rd generation Feature Pack 2 (otherwise abbreviated as S60 3.2).

I have a N78 lying around so I decided to test it myself. And lo-and-behold none of the VoIP services I am accustomed to using worked. Truphone and Gizmo are two services I typically use and neither of them work.

Ditto for Fring, a VoIP-IM service as well. However, all three worked on the Nokia E71 smart phone. When I asked Nokia if this was true, the company sent me this response, which pretty much admits that is the case, though it didn’t say why.

Nokia Nseries is committed VoIP services as part of its offering. That is why we have included SIP stack and improved the developer VoIP offering in S60 3rd Edition Feature Pack 2 by enhancing the VoIP APIs to improve the call quality, as an example.

A Nokia VoIP client is not included with the Nokia N78 and the Nokia N96 and VoIP solutions based on this particular client such as Gizmo will not work. However, Forum Nokia will cooperate with third-party developers to support them in porting their applications from S60 3.0/3.1 releases to S60 3.2. One example is Fring, whose popular application will be offered via Nokia’s Download! service for the Nokia N96.

Truphone isn’t waiting around for Nokia to do something. A company spokesman told us: “From Truphone’s perspective Nokia has removed the VoIP client from all the N-Series phones for the planned future. We are putting in a replacement client functionality so that existing customers are not orphaned.”

The theory is that Nokia isn’t mucking with E-series devices because they are more enterprise focused. Since VoWLAN is more popular with the corporations, Nokia can’t afford to remove the VoIP functionality. It is one feature that makes the phones more competitive with say Blackberry.

On the consumer front, however, voice-over-WiFi has become a thorn in the side of carriers, as exemplified by actions of carriers such as T-Mobile against VoWiFi-startups such as Truphone. Furthermore, the emergence of 3G has made it easier to route calls over the 3G network.

Funnily enough, the decision to back away from built-in VoIP comes at a time when fixed mobile convergence is finally beginning to gain traction, especially in Europe and Asia. In the U.S., Nokia launched a handset that works with T-Mobile’s Hotspot@Home service.

Nokia has to be taking a lot of heat from carriers over making VoIP easy on its devices. Whichever way you look at it, I think it is a bone-headed move by the company, which should be trying to out-innovate its competitors and be more open in terms of its features.

The decision also brings into question company’s new mantra of being open and open-source friendly. Being open isn’t about releasing some software in open source, but it is about having an open mind. Shutting down a much loved VoIP feature isn’t exactly the right move.

As our reader very aptly wrote:

….does this move by Nokia really appear to be the type of move that is indicative of a culture shift towards open source per the Symbian Foundation? Google is already culturally rooted in open source (its entire infrastructure runs on Linux clusters). I am not so confident about Nokia’s ability to shift to open source…

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Jajah, in its effort to become a backend platform for VoIP services, has started offering call termination, billing and other such services to one and all comers. They got a big boost when they signed up Yahoo! Now, the Sequoia Capital-backed company has signed up SIPphone, the company behind Gizmo and will handle their call termination. Does this mean Gizmo’s call quality will increase? I certainly hope so – I have stopped using the service because of poor quality of voice.

Instead, I have opted for RingCentral, which recently introduced a Mac OS X soft client (in addition to a PC version) and it is doing a might fine job for me. I was highly skeptical of RingCentral in the past but they have won me over with their high quality service. (Full review, pending!)

Soft phones – whether they are from RingCentral, Vonage, Gizmo or Skype extremely useful. I almost never am close to a landline, but an internet connection is always handy. Using soft phone, I can make quick calls without really breaking away from the computer screen. I am not alone in professing a liking for Softphones. A Frost & Sullivan report says that as a percentage of total IP-telephone market soft phones share will increase from 5 percent to 20 percent by 2014. Softphone sales rose to 416,000 units, worth $18.9 million in 2007, up 30% over 2006.