The amazing quality improvement in cell phones can be measured in a number of different ways: the explosion of useful and fun apps, the bazillion-megapixel cameras, the museum-quality industrial design that makes hiding the phones in holster feel like a crime. All of which highlights one area where the phones have remained pretty much awful: voice quality.

That’s about to change. Cellular phone calls, after 30 years of sounding worse than landlines, are on course to finally achieve equivalent sound quality by late 2012. After that mobile phone calls will continue to improve until they eventually sound better than today’s landlines.

That might sound fanciful.  Inferior sound has been a feature of cellular phones since the birth of the industry. Such inferiority even seems to make technical sense.  Calls on landlines have the luxury of cruising down dedicated wires while cell phone calls must travel unpredictable paths through the air and often through walls and other objects.

In fact, no law of physics says cellular calls must sound lousy.   Take the annoying delay that today’s cell phones add to a conversation.  The noticeable gap between speaking and being heard frequently leads to one person to think a transmission lag is a pause in the conversation, causing both people to talk at the same time, then pause at the same time, then talk over each other again.

The good news is that the “4G” systems now being deployed are capable of routing calls with barely any delay.  The most common 4G technology, which is known as LTE, knocks the delay down from roughly two tenths of a second to three one-hundredths of a second.  In human terms that’s the difference between annoying and imperceptible. (Landline delays vary, but typically amount to less than one-tenth of a second, and are thus scarcely noticeable.)

The other main impediment to good call quality—lack of capacity—is also changing.  As anyone who has tried to compress a digital music file can attest, a song compressed into 128 kilobits per second still sounds quite good. At  64Kbps the fidelity drops way off and at  32Kbps the music begins to become barely worth listening to.  No wonder cellular calls in the U.S., which often get packed into just 8Kbps, get a bad rap.

To be fair, highly-compressed voice calls made a good deal of sense in the past.  For decades it was all the industry could do to keep pace with the booming demand for phone calls.  Americans talked on cell phones for 200 billion minutes in 1999; by 2009 demand was up ten-fold, to 2.2 trillion minutes.   To help handle the  surge, the carriers very reasonably decided to compress calls, sacrificing fidelity to gain capacity.

Now the wild growth in voice traffic is over. According to new numbers from the CTIA, the industry’s main trade group, Americans spent 2.257 trillion minutes on cell phones in the year ended June 30, 2010, almost exactly what they did in the previous year.  As the industry continues to inexorably increases its capacity—by buying more spectrum, deploying better technology and building new cell sites—it has the option of putting those new bits to work making phone calls sound better.  Using modern compression technologies, a call that takes up 20Kbps can sound like a landline.  At 30Kbps or 40Kbps,  it will sound better than a landline.  (Even landlines clip off the higher ranges of the human voice.)

Now for the bad news.  While every major U.S. carrier is either currently building a 4G network or about to, in every case the focus is on increasing data capacity, not improving voice quality. While the new 4G networks operate like the Internet — using a modern “packet switched” network — for now carriers will continue sending phone calls over an old-fashioned “circuit-switched” transmission system running on a 2G or 3G network. That’s why better sound quality won’t happen this year, or even next.

But it will happen.  A group called VOLGA is defining a system for sending voice over LTE networks that will make it increasingly easy and cheap for carriers to send phone calls over the newer parts of their cellular networks. Applications like Skype already know how to disguise phone calls as a generic “data transfers,” allowing users to make calls over their data connections.  What happens if Skype and its ilk start using the power of the 4G networks to start offering not just cheaper calls but higher quality calls as well?

Already the wireless providers have seen the mobile market change from one where finding and signing up new consumers was easy to one where they’re forced into trench warfare to poach customers. At first that was done through having access to the best hardware or the best network. Voice quality will surely soon become a point of differentiation. And when that happens, the days of “No, I can’t hear you now” will be over.