The Lure of Wireless Data

Advancements in the wireless handset -- screen size, graphics capability and ease of use -- are sure signs of convergence, a predominant buzzword aimed at reducing the inevitable intersection of the wireless and computing industries.

But convergence, and making the marriage work to lure users who are reluctant to give up their grip on the desktop PC, isn't as easy as simply watching the two industries collide and hoping for the best. All the usual suspects will play a role: network bandwidth, emerging standards and pricing plans.

New issues also are entering the fray, such as the furious pursuit of exclusive Internet agreements, largely through portals, and the developing hunger of easier-to-use interfaces.

"It is hard to see how the wireless device will replace the landline PCs," said Rony Zarom, CEO of Exalink, a supplier of platforms for delivery of Internet-based services to wireless devices. "Nevertheless, the number of data wireless devices will outnumber the number of PCs in the future. Moreover, since the wireless device is on you anywhere you go and at any time, it will be much more natural for the user to use it to access Internet-based services than the PC landline."

Wireless telecom's heavy hitters have spent nearly $20 billion since 1998 to ready their systems for the next generation, with WAP as the foundation.

AT&T Wireless, for instance, is set this year to test the digital data-delivery system known as EDGE, which can pump 384kb/s vs. the current 19.2kb/s. (At 384kb/s, experts say, EDGE could be a boon to GSM carriers who don't have 3G licenses.) Sprint PCS reportedly is testing technology that provides 2Mb/s.

Buying into the new technologies such as EDGE is key, Zarom said. Data's swift overtaking of voice traffic among fixed networks soon will spill into wireless, perhaps sometime this year or in 2001, analysts say.

But wireless networks will be challenged to evolve and make room for the anticipated traffic -- with voice and data moving simultaneously.

"Adjusting the wireless infrastructure to provide WAP and other data services does require some investment in reconstructing of the fundamental layer," Zarom said. "Nevertheless, price is not the issue. The wireless operators must provide added-value, Internet-based services to stay competitive. It is no more a question of taking a leading role, being ahead of competition, but a necessary step to survive the competition."

Zarom pointed to the implementation of GPRS and the Universal Mobile Telecommunications System (UMTS). Both are recognized generally as 3G systems, and many see GPRS as clearing the path to UMTS, a system promising to deliver multimedia to the handset.

What's more, UMTS promises to standardize cellular technology globally and soon may deliver global roaming.

STRAINING THE NETWORK One sure result of the new technologies is strain on the network.

"Obviously, carriers need to make sure their networks can support the data," said Patrick McQuown of Proteus, an Internet development and consulting agency.

Network capacity in the age of booming data traffic will be key, because unlike voice calls, it is potentially more troublesome for data calls to start, then be interrupted or dropped, then start again.

"When you get a dropped call, you just call back," McQuown said. "But with a data call, you get dropped, then you start over, handshake with the modem and resubmit the order. That could be trouble."

Moving data and voice over networks poses a big challenge of maintaining the integrity of the information being put through the air, said Jeff Harris, a founder of TechSolutions, a southeast regional technology staffing firm.

"The potential for failure is much higher, and the opportunity to pirate that information is high," Harris said. "The real experts are not going to be the computer people; it will be the wireless companies ... There is a great deal of inconsistency in digital wireless transfer as anyone can witness on their digital mobile phone when they lose a call or hit a down spot."

Harris is skeptical that today's networks could accommodate the kind of soaring usage predicted once Internet applications catch up with user expectations.

"I can't see the wireless companies successfully marketing wireless services for computer data on a global basis anytime soon until they build a lot more towers and build out the network," he said.

NO PAIN, NO GAIN Boosted network capacity won't necessarily carry the day.

Let's pretend for a moment: As a carrier, you've made huge strides. You took all the things that made the desktop Internet experience enjoyable for PC users and shrunk it for the handset. You've teamed with a portal company to deliver easily navigable content. Super-fast technologies, such as EDGE or UMTS, are delivering data at light speed. Nice going; you've successfully transformed the handset, right?

Not so fast.

Internet users are accustomed to 24x7 connections, unlimited webbing, e-mails with attachments, all for about $22 a month, maybe less. Such an all-you-can eat Internet presents a problem for wireless on two fronts -- the aforementioned network-capacity issue and pricing.

"The people who will use it, will use it for a long time," McQuown said. "They're going to want unlimited connection."

Unlimited connections may be possible, but the user will pay big for it. For comparison, what wireless users currently pay for a basic voice-only handset (as low as $30 for 300 minutes from Sprint PCS) dwarfs, minute-for-minute, what one pays for a monthly unlimited connection to the Internet from the home PC.

The good news -- at least for users -- is that the price of Internet connections through the handset is expected to drop as the idea catches on. Carriers are expected to find other ways to recoup any losses on connections, most likely through the kinds of advertisements that have become so lucrative through the PC-based Internet. Unique agreements are sure to follow, too.

"Business and economic models will always vary and evolve rapidly with new media," said Philippe Kahn, chief executive of Starfish Software, a supplier of core device and server technologies for wireless devices. "For example, if I wanted to have another user receive a document on his smart phone without his explicit agreement, I, as the sender, will probably want to guarantee footing the bill. If a carrier wanted to provide free information and services, then it must be seen as a way to gain market share by differentiating the service, or a subsidizing business model such as advertising or getting a portion of an e-commerce transaction will need to be devised."

Exalink's Zarom said carriers will be willing to subsidize the handsets to better penetrate the wireless data community.

"Carriers hope to recover some of the losses by generating more revenue from mobile commerce services, which carry revenue stream with it," he said. "Advertising is definitely another source of revenue that will enable wireless carriers to recover some of the losses resulting from handset subsidization. Nevertheless, there are other benefits gained from strengthening customer loyalty, such as higher retention rate and reduction in losses as a result of churn reduction."

McQuown had another take.

"What the carriers are going to see is the same thing that land carriers saw: a rise in the percentage of data calls when compared to voice calls. However, what's different here is that the carriers are being smart and are learning from the missed opportunities that eluded the Ma Bells.

"Most people pay two bills for their dial-up Internet access -- one to the local phone company and one to their ISP," he said. "The wireless carriers are smart in that they are making the phones come with 1-touch Internet access and bill the user by the minute for any data calls, since they can track a data call just like they can a voice call. (This) has allowed the carriers to have two sources of repeating revenue, which is why so many local Ma Bells have gotten into the ISP business."

RECOUPING INVESTMENT Advertising on the handset as a revenue stream is directly tied to the handset's own development. Content on the screen has been easy enough, with text-only headlines, stock quotes and e-mails. But, so far, the large majority of WAP-enabled phones aimed at mainstream users limit messages to somewhere between 100 and 120 characters, leaving some to wonder if advertisers truly see the handset as a viable tool for reaching consumers.

But the handset's immature displays apparently haven't bothered Internet content providers or portals, such as Yahoo!, Excite or MSN, which are furiously chasing agreements with carriers with hopes that the handset will catch up to the functionality of the desktop. It's a buy-now, cash-in-later philosophy.

"Wireless handsets are ... as capable of processing information as any other PC but in limited capacity," Zarom said. "It is only natural that wireless users will be able to use their handset to connect to value-added services, Internet resources and mobile commerce."

Indeed, screen advancements may very well represent the biggest opportunity for wireless to truly replicate the desktop Internet, analysts say.

"While advertising over a WAP device isn't great yet, it will come in due time," McQuown said. "The opportunity that exists for carriers is that they control prime space. For example, a carrier, say Omnipoint, could have a deal with a content provider, say CNN, so that once a user selects "news" from his WAP phone, that user would then go to the CNN site. This is a source of potential revenue for the carrier, and the content provider would in turn receive revenue from advertisements."

The potential could be huge.

NATURAL EXTENSIONS Such forecasts beg an obvious question about the future of landline connections to the Internet. Few are willing to bet that the handset will make PCs obsolete any time soon.

"WAP is a natural extension of the Internet," McQuown said. "Why not receive the great content you get from your computer and get it instead on your handset? However, until phones move beyond small screens and lousy text input, the computer will always be easier and prettier to use. Still, phones are far more mobile and easier to access. As for their displays and text inputs, those will improve with time."

Said Exalink's Zarom: "It is hard to see how the wireless device will replace the landline PCs. Nevertheless, the number of data wireless devices will outnumber the number of PCs in the future. Moreover, since the wireless device is on you anywhere you go and at any time, it will be much more natural for the user to use it to access Internet-based services then PC landline."