The Bottom Line

Many believe wireless data to be an important adjunct to wireless voice for systems that can support both. So it seems logical that data should be a significant contributor to the carriers' bottom lines.

Certainly, there is a demand for wireless data. Mobile workers are discovering that when they are away from the office and are limited only to voice access, they are missing two important types of communications: e-mail and faxes. Wireless voice extends the reach of mobile workers from the office to the field. Likewise, when workers are away from the office, wireless data should extend their reach by pro-viding electronic communications and information similar to what they have at their fingertips when they are sitting in front of their desktop computers.

Until recently, carriers have shown little interest in providing data along with voice services for many reasons:

* PCS carriers need to generate cash.

* Voice is easy to sell; data is not.

* Wireless data is not like wireless voice. It is more difficult to implement, and it is difficult to use.

* A data sale requires more time and effort for the carrier.

* For data to be useful to the customer, it must be data he wants and needs.

Most of the communications industry has been focused on packet-data access across the networks, not circuit-switched dial-up. Although packet data is better suited for many applications, it is more difficult to implement because it often requires direct connections between a corporate LAN and the network.

Times Are Changing For the past few years, wireless modems and specialized software have been available for those who want to implement wireless data. Even so, assembling all of the pieces has been tough. To provide data services, carriers must become more involved with each customer. It's not a matter simply of providing a phone and sending a monthly bill. They must establish connection points and, in some cases, build modems into the network. Then there is the issue of pricing.

Today there is a new awareness that circuit-switched data may be a satisfactory solution. As a result, carriers have a renewed interest in providing data, including short messaging, dial-up access and, in some cases, packet data.

The trick always has been to make wireless data as easy to use as wireless voice. Although this has not happened yet, there has been progress. The industry has discovered that it can make wireless data as easy to use as wired data. Although wired data is easy, millions of mobile computer users have learned how to attach modems to their laptops, find phone jacks, set up dialing strings and get connected.

Digital Networks Digital wireless networks, especially CDMA and GSM, support circuit-switched dial-up networking. Now users can employ the same techniques and software to connect over wireless networks that they use to complete dial-up wired connections. True, the speeds are slower at 14.4kb/s or 9.6kb/s compared with 33.6kb/s. However, when connecting from hotels, the best available wired speeds are only in the 20kb/s to 25kb/s range.

The biggest plus with circuit-switched dial-up is that once users are connected via a wireless link, they can access their own information just as they do with wired access. They can dial into the company's remote access server as though they were using a wired connection. Even the IS manager can't tell whether the connection is being made viaa wireless or wired call.

Making Money Carriers are taking a hard look at data services, users are asking for data services, and equipment and software vendors are providing the tools to enable data services.

The wired phone system in the United States carries as much data traffic as voice traffic. Some surveys indicate that data minutes now surpass voice minutes. Will this trend extend into the wireless world? Probably not, at least for the next five years. However, this is not to say that carriers can't make money selling data services, just that the ratio of data to voice usage for wireless systems will grow more slowly than it has across the wired systems. This is partly due to the differences in speed (until third-generation systems are deployed) and partly to the differences in data usage for mobile workers vs. desktop users. Faxes make up a large portion of wired data traffic.

Some estimates say that about 3% of today's wireless voice users in the United States use or have used the wireless networks for data. In Europe, where GSM data has been available for a number of years, the number is higher. My projections are that circuit- switched data usage over wireless networks will grow from this level to about 30% over the next five years.

Short messaging also will become more widely used as access to these services is improved. Short message service usage will grow to about 50% of voice users in this same period, and packet data usage will begin showing on the charts.

Carriers that price data at the same rate as voice will find that their incomes from data services will mirror these percentages. Those that expect to charge a premium for data services will find quickly that subscribers will churn to a system that prices voice and data equally or offers a lower price for data. Today, some GSM carriers that offer a fixed number of minutes for a flat monthly rate are limiting the minutes to voice calls. They are charging for data usage at the "additional minutes" rate, which results in charges for data that are sometimes more than double the charges for voice.

Mobile workers will not spend hours "surfing the 'net" from their wireless phones, but they will use their phones to access information they need in the field. Such data often will be presented in a text-based format, thus reducing the connect time when compared with wired access with full graphics. Carriers that provide a convenient pipe back to users' own data and then add value with other types of content will find that they will sell more minutes of airtime and add to their bottom lines. Today, many of those involved in this business are putting the cart before the horse by providing extra services first and then access to users' own data sources.

Fighting Churn The most important reason for carriers to take the time to understand the types of data access and services they need to offer has to do with churn rates. With so many carriers offering voice services, those who differentiate themselves by providing additional services will attract customers from their competitors' networks while retaining their own customers.

Whether a carrier can make money with data is only part of the issue. The greater question is whether a carrier can afford not to offer data when its competition does. Will a carrier's bottom line be enhanced by data? In the long term, the answer is yes. In the short term, it will cost more in terms of additional support services, information resources and marketing dollars. The cost to acquire a voice-and-data customer or to add data for an existing voice customer will be higher than the cost to capture a new voice customer. But once subscribers are on your network, and they have learned how to access their own information, they will be much less likely to churn.

Voice-and-data customers will increase a carrier's revenue because they will use the network more. Data connections (using circuit-switched dial-up) tend to be lengthier than voice calls. As e-mail becomes more mission-critical in nature, and as the computer and communications industries learn that web surfing is not the highest and best use of a wireless network, data usage will go up. Customers will stay on a system longer, and there will be more opportunities to sell them value-added services.

Wireless data requires an up-front investment, and the cost of acquisition is higher. But carriers must become more than simply a conduit for voice in order to succeed in the data world. Money can be made, and customers can be retained. The better the services and the easier the connection, the more data will be used over these networks. If the industry can refrain from hyping the future and 3G capabilities until they are ready for prime time, carriers can and will make money with wireless data as we know it today.