For a little $1 iPhone app, Line2 sure has the potential to shake up an entire industry.

It can save you money. It can make calls where AT&T's signal is weak, like indoors. It can turn an iPod Touch into a full-blown cell phone.

And it can ruin the sleep of cell phone executives everywhere.

Line2 gives your iPhone a second phone number -- a second phone line, complete with its own contacts list, voice mail and so on. The company behind it, Toktumi (get it?), imagines that you'll distribute the Line2 number to business contacts and your regular iPhone number to friends and family. Your second line can be an 800 number, if you wish, or you can transfer an existing number.

To that end, Toktumi offers on its website a raft of Google Voice-ish features that are intended to help small businesses look bigger: call screening, Do Not Disturb hours and voice mail messages sent to you as e-mail. You can create an "automated attendant" -- "Press 1 for sales," "Press 2 for accounting," and so on -- that routes incoming calls to other phone numbers. Or, if you're pretending to be a bigger business than you are, route them all to yourself.

The Line2 app is a carbon copy, a visual clone, of the iPhone's own phone software. The dialing pad, your iPhone Contacts list, your recent calls list and visual voice mail all look just like the iPhone's.

So you have a second line on your iPhone. But that's not the best part.

Dual-mode phone

Line2 also turns the iPhone into a dual-mode phone. That is, it can make and receive calls using either the AT&T airwaves as usual or -- now this is the best part -- over the Internet. Any time you're in a wireless hot spot, Line2 places its calls over Wi-Fi instead of AT&T's network.

That's a game-changer. Where, after all, is cell phone reception generally the worst? Right -- indoors. In your house or your office building, precisely where you have Wi-Fi. Line2 in Wi-Fi means rock-solid, confident reception indoors. Line2 also runs on the iPod Touch. When you're in a Wi-Fi hot spot, your Touch is now a full-blown cell phone, and you don't owe AT&T a penny.

But wait, there's more.

Turns out Wi-Fi calls don't use up any AT&T minutes. You can talk all day long, without ever worrying about going over your monthly allotment of minutes. Wi-Fi calls are free forever, though Line2 service costs $15 a month (after a 30-day free trial).

Line2 also lets you call overseas phone numbers for Skype-like rates: 2 to 5 cents a minute to most countries. (A full table of rates is available at As a handy globetrotters' bonus, calls home to numbers in the United States from overseas hot spots are free.

All of these benefits come to you when you're in a Wi-Fi hot spot, because your calls are carried by the Internet instead of by AT&T. Interestingly enough, though, Line2 can also make Internet calls even when you're not in a hot spot.

It can, at your option, place calls over AT&T's 3G data network, where it's available. Every iPhone plan includes unlimited use of this 3G network -- it's how your iPhone sends e-mail and surfs the Web. So once again, Line2 calls don't use up any of your monthly voice minutes.

Unfortunately, voice connections on the 3G network aren't as strong and reliable as the voice or Wi-Fi methods. Cellular data networks aren't made for seamless handoffs from cell tower to tower as you drive, for example -- there's not much need for it if you're just doing e-mail and Web -- so dropped calls are more likely. Fortunately, if you're on a 3G data-network call and you walk into a hot spot, Line2 switches to the more reliable Wi-Fi network seamlessly in mid-call.

Whenever you do have an Internet connection -- either Wi-Fi or a strong 3G area -- you're in for a startling treat. If you and your calling partner are both Line2 subscribers, Line2 kicks you into superhigh audio-quality mode (16-bit mode, as the techies call it).

A few weaknesses

As you've no doubt already concluded, understanding Line2 is complicated. You have three different ways to make calls, each with pros and cons.

You miss a certain degree of refinement, too. The dialing pad doesn't make touch-tone sounds as you tap the keys. There's no Favorites list within the Line2 app. You can't get or send text messages on your Line2 line. (The company says it will fix all this soon.)

There's a faint hiss on Line2 calls, as if you're on a long-distance call in 1970. The company says that it deliberately introduces this "comfort noise" to reassure you that you're still connected. On incoming calls, if the Line2 app is open at the time, you're connected via Wi-Fi when it's available. If it's not running, the call comes in through AT&T, so you lose the benefits of Wi-Fi calling.

Still, Line2 is the first app that can receive incoming calls via either Wi-Fi or cellular voice, so you get the call even if the app isn't running. That's one of several advantages that distinguish it from other voice-over-Internet apps like Skype and TruPhone.

All of this should rattle cell industry executives, because let's face it: The Internet tends to make things free. Cell carriers go through life hoping nobody notices the cellephant in the room: that once everybody starts making free calls over the Internet, it's Game Over for the dollars-for-minutes model.

Line2, however, brings us one big step closer to that very future. It's going to be a wild ride.