Dog days of wireless data

Thomas Wheeler, president and CEO of the Cellular Telecommunications & Internet Association (CTIA), did his best at the association's annual wireless trade show in Las Vegas in March to address the realities of the wireless data world.

The wireless industry was struck with disappointment in 2000 with its experiences in wireless data. Take-up of wireless application protocol (WAP) handsets was significantly lower than expected, and the protocol was criticized for not being user-friendly enough. GPRS handsets are late and won't provide the high data speeds the industry had hyped last year. And content is not compelling enough, say critics.

Misunderstood

“People don't understand,” Wheeler said during the first Wireless 2001 keynote discussion. “The Internet went through an evolution and so will the wireless Internet.”

The industry set up bad expectations, many wireless and Internet executives agreed last month. Carriers now are trying to focus on making the best out of the limitations of the wireless devices that offer Web services.

User interfaces need to change, voice technology needs to improve, throughput speeds should increase and color screens with better battery life need to emerge before the wireless Internet market can take off, said Richard Siber, partner with Accenture, formerly Andersen Consulting.

“There has been so much buzz about the wireless Internet, then the wheels fell off,” said Joe Lawver, director of information services and CDMA data products with Verizon Wireless. “There is still excitement, but people are cautious today, he said. “We have to have rational business models for this to work.”

“I think we've been all stuck in one debate,” Jerry Yang, co-founder of Yahoo, told keynote attendees. “The wireless Internet market has not done the hockey-stick curve that everyone expected. It's still two to three years out.”

“The fundamental challenge is to drive multiple competitors. Until the devices and technology are there attracting the application providers, then we can talk about getting voice minutes transferred to data minutes.”

As different wireless Internet devices have evolved, Yang said Yahoo is looking at different personalization capabilities, including location-based services, services geared toward alerting the customer rather than requiring them to hunt and peck for information and a heavier emphasis on voice-activation technology.

“We want to make sure the Internet fits the form factor,” said Yang.

Vendors also are stepping up to the plate, helping their carrier customers find appropriate business models and applications that will stick in the marketplace. Lucent Technologies has been aiding carriers by reaching end users jointly, analyzing applications such as location-based services and looking at patterns of use to see which applications carriers can make money from, said Stacey Gelman, vice president of mobile Internet with Lucent.

“We've trialed location services such as the ability to locate banks and traffic information to see which ones are sticky and which ones carriers can make money off of,” said Gelman. “We're helping them with the business modeling.”

Happy carriers

Still, some U.S. wireless operators said they were pleasantly surprised in 2000 by the uptake of their data offerings and are beginning to understand how the business models will play out.

“We haven't changed our model much,” said Charles Levine, president of Sprint PCS. “Our projections were that we'd be happy if we got a 10% take rate by the end of 2000. We have more than 10% using the wireless Web.”

“We were pleasantly surprised by people's willingness to pay,” said Lawver. “Early predictions last year were that the industry would have to hit a zero access point.”

Lawver said he believes Verizon is beginning to demonstrate the value of the wireless Internet. Customers are willing to pay $6.95 per month plus airtime, and Verizon hopes that it can take the business model further by eventually charging for the wireless Web on a per-use basis.

“There are only a few sites today that have actual charges, but as we add mobility, we can ingrain that mentality in the minds of customers. We want to take that model,” said Lawver.

Lucent's Gelman has witnessed more clarity around carriers' wireless Internet business models, including billing schemes. The wireless Internet billing schemes won't be the same as the wired Internet billing model in which the majority of Web site content is free.

“There still is experimentation as to whether to charge a flat rate or per packet, but ultimately people will pay for value,” she said. “The ability to bill based on the value [customers] are receiving is what will differentiate the carriers in this space.

Sprint PCS also wants to get away from the all-you-can-eat wireless data pricing, Levine said. It is exploring different ways of charging for service, ranging from a per-minute basis to a transaction basis.

“I don't think the industry should go to an all-you-can-eat model. There are different economics,” said Levine. “Capacity is not endless. On wireless it's a real capital expense unless you're charging a huge amount.”

Verizon is working off three different business models: access and airtime, premium placement, and transaction and advertising. Content providers have been willing to pay top dollar for premier placement on handset screens. America Online is said to have paid about $50 million for placement on Sprint PCS phones. This has become a surprising source of revenue for carriers.

“We'll see if this holds with the changing economic market,” said Lawver.

Verizon announced a deal last month with Yahoo Everywhere, the wireless arm of the Web portal, which will integrate Yahoo content as well as Yahoo Messenger into its service. Verizon wireless Internet subscribers will be able to send and receive instant messages from their handsets. The carrier also said it is allowing its customers to access any wireless Web site, not just its own home deck sites.

It teamed with Pinpoint to offer a unified search and directory engine that will allow customers to search listings of thousands of wireless Web sites.

“We're breaking down the walled garden through search and directory services,” said Lawver. “They aren't limited to our home deck anymore.”

And it's clear that no single way of doing business with content providers has emerged across the wireless industry. Levine said Sprint PCS has instituted about six to 10 models of partnering with content providers. Some include direct equity investments from Sprint PCS.

AT&T Wireless, which has declined to speak on the record, citing a quiet period, as a rule doesn't pay for content or share revenue with content providers.

Ray DeRenzo, group director of Internet content and applications with the Vodafone global platform and Internet services group, doesn't believe one content partnership model will ever emerge.

“It varies on the nature of the content, and in some cases the content provider's underlying business,” said DeRenzo. “In some cases, we acquire content or distribute it with no monetary exchange. In other cases, where there are some commerce opportunities, there is revenue sharing.”

“The ability to take a piece of content and message enable that is compelling, being able to do something based on that content. That's how we qualify the types of content we acquire, if it leads to other types of transactions associated with that content.”

AT&T Wireless, Sprint PCS and Verizon have all introduced online gaming. Sprint PCS has led the charge, having signed up nine content providers to supply 30 different games.

“The lesson is there is a huge youth market,” said Levine. “I'm frustrated by the time it took us to get gaming on the phones.”

Buzztime, a producer of interactive trivia quiz shows and play-along sports games, said Sprint PCS customers spent more than one million minutes playing Buzztime's trivia games after the first 49 days of launching the games.

Jamdat, another wireless gaming provider, announced in January that its Gladiator game has seen more than 340,000 users play more than 720,000 games and accrue about 3.2 million airtime minutes.

Verizon expects infotainment will be compelling content for the consumer market in the years ahead. “We're excited about gaming. We've been slower than others to move on this, but it fits a good demographic,” said Lawver.

Last month Verizon signed on Boxerjam, a developer of games for wireless devices, to provide its Mobile Web customers with two new games called Knockout and Dr. Popko. In Knockout, players try to knock out the computer by matching correct answers to pop culture questions. Dr. Popko is a word-scramble game with players earning points for correct responses. Verizon signed a deal with Unplugged Games in January.

AT&T Wireless, which announced a $10 billion investment from Japanese mobile giant NTT DoCoMo earlier this year, signed an agreement in February with DoCoMo and Sony Computer Entertainment to begin working together to develop network services and applications allowing AT&T wireless customers to use their wireless devices to play interactive games on Sony's PlayStation platform.

The voice equation

Leap Wireless is making its first move into the wireless data arena via brief voice clips that include local news and sports, weather, personal interest and music and movie reviews delivered to Leap customers who subscribe to this add-on feature. Leap purchased the technology and intellectual property rights of Spotcast Communication to offer the service and will launch the yet-to-be-named service in select markets in the first half of this year.

“Handsets are associated with communication,” said Mark Kelley, Leap's chief technology officer. “When you start adding on voice clips, it's an easy way to prepare customers for the wireless Internet.”

Leap's content offers are sponsored by promotions and relevant advertising. Advertising is purchased at a premium because the audience is highly targeted, said Kelley. Market research conducted last June indicated that nearly one-third of users made a purchase as a result of messages delivered to their phones.

No changing courses

Carriers continue to steam ahead toward the wireless data market, albeit some more cautiously than others. While many have identified exact business plans for making money from the wireless Web, they recognize there are many more models to experiment with, including m-commerce and location-based technologies.

Carriers claim all along that they knew the wireless data market would develop slowly. Now the rest of the industry is catching up to their expectations.

Jimmy Carter leads off last day of show

Former U.S. President Jimmy Carter, the final keynote speaker at Wireless 2001, sat down with CTIA president and CEO Tom Wheeler to discuss current events, his passion for writing and memories of being president.

Although the 39th president was elected more than 20 years ago, he remains personally involved with the political process. Along with former President Gerald Ford, Carter has been evaluating each state's process to ensure that the U.S. voting process remains fair. When he is not working for the good of the country, he and his wife, Rosalynn, spend their time writing, a pastime that also has helped support them financially, Carter said.

“I really enjoy writing… since I left the White House, our books have been a major source of our income.” Carter has finished 14 books so far and currently is working on a novel about the last four years of the Revolutionary War.

As a child, Carter said he never imagined he would become president. However, he believes his experience growing up in rural Georgia surrounded by issues such as poverty and race helped him deal with a multitude of national issues. He especially is proud of the work he did to deregulate the oil, airline and communication industries.

“Though it is not often realized, without that deregulation work this [pointing to the crowd] would not have been realized,” he said.