The system is built to rely on a maximum of 10 simultaneous calls to each Wi-Fi access point, meaning that the 11th call gets a busy signal, Matsumoto said. Meru Networks in Sunnyvale, Calif., provides a call admission control server used to coordinate peak levels of traffic, and Osaka officials can also add more access points for areas of heavy demand, Matsumoto said. "We have not experienced any fatal troubles so far," he said last week.

To reduce cellular network charges, Osaka has relied on a least cost routing (LCR) function built into its Session Initiation Protocol servers, Matsumoto added. With the LCR technology, a cellular phone number is converted to an extension number for use within a wireless LAN area. Also, a cell phone can be considered a fixed-line phone for calling to a cell phone outside its extension area, to further lower costs. Annual costs at Osaka have been reduced by about 30 percent, according to Kamal Anand, vice president of product management at Meru.

The greatest technology obstacle in setting up the system was providing efficient WLAN configurations in nearly 50 offices throughout Japan, Matsumoto said. "The transparency and reflectiveness of radio vary from building to building, from floor to floor or from room to room," he said. "There is no general way of designing and configuring wireless LANs."

In addition to Wi-Fi configuration problems, some Osaka employees were reluctant to give up their wired phones, said Toshi Kibe, president of Nissho Electronics USA in Santa Clara, Calif., which provided integration services on the project. "Usage now is good ... but some people didn't like the idea of wireless," Kibe said. "They have a lot of older guys who needed time to get used to it." One adjustment was having to remember an extension number to be able to transfer a call over wireless, he said.

Meru announced the Osaka project at its inception last July, noting that it would rely on Meru's WLAN System for voice over IP and would use Tokyo-based NTT DoCoMo's dual-mode cellular/Wi-Fi service and handsets. Meru also has a partnership with three top VoIP system manufacturers in Japan, including Oki Electric Industry Co., Hitachi High-Technologies Corp. and Fujitsu I-Networks. Meru competed against Cisco Systems Inc., NEC/Airespace and Aruba Networks for the Osaka Gas project, according to Meru officials.