Subject: [NEXTEL-1] What Has Wireless Buzzing

From: Marcel <[email-masked]>
Date: Wed, 19 Mar 2003 19:22:42 -0500

TECHNOLOGY

What Has Wireless Buzzing
How companies make money from Wi-Fi, the latest in push-to-talk
technology, and what’s new in handsets. A report from CTIA’s annual
convention.

FORTUNE

Wednesday, March 19, 2003
By Christine Y. Chen

Day Two of the Cellular Telecommunications and Internet Association’s
annual wireless convention has come and gone, and three themes from this
year’s conference have emerged.

Wi-Fi
Wireless local area networks (WLAN) continue to create a lot of buzz. But
how will companies make money from it? So far, T-Mobile has the most
prominent consumer Wi-Fi offering, thanks to its partnership with Starbucks.
And so far, it seems to be doing well. It doesn’t cost a lot for a café to get a
cable modem or DSL and stick a Wi-Fi antenna on the end. Customers who
want to surf the Internet without wires can bring their Wi-Fi-enabled laptops
into one of some 2,000 Starbucks with a T-Mobile hotspot. It ain’t cheap for
coffee drinkers-- T-Mobile charges $29.99 per use for unlimited use, or 10
cents per minute. That makes for some nice Wi-Fi margins for T-Mobile. But
what will happen when others get into the game? Verizon announced at the
conference that it will start setting up hotspots around the country soon, and
AT&T is hopping on the bandwagon too. Competition will bring those
margins down. And there’s also a grassroots movement from those who
believe consumers shouldn’t have to pay for Wi-Fi at all. (Full disclosure
here: One of my neighbors has an unsecured Wi-Fi connection, and
unbeknownst to him or her -– I don’t know who it is –- I am "borrowing"
bandwidth. Whenever I bring my laptop to one particular part of my
apartment, I can pick up a Wi-Fi signal). Groups like NYCWireless are trying
to set up hotspots in public areas, like parks. As Wi-Fi becomes more
popular, carriers are going to have to figure out new ways to milk revenue
from their Wi-Fi customers.

There’s another issue that people have been debating about. Will Wi-Fi be a
competitor for a fresh generation of souped-up networks? Or will these new
higher-speed wide area networks be enough? Telecom execs all hold
different opinions on the outcome. But they do agree on one thing--what the
customer wants. It's pretty basic: Wireless data users would like to access
the Internet no matter where they are, be it at Starbucks or on a corporate
campus. They also want a seamless experience if they move from one
network to another, like cell phones are in roaming mode. Several startups
here at CTIA are trying to make the argument moot, by addressing the
underlying problem: -– making new generation commercial networks and
Wi-Fi networks interoperable.

Push-to-Talk
A wireless carrier’s fiscal health is usually measured by its ARPU (average
revenue per user). A typical ARPU in the industry would be in the high $50s
or low $60s. But one company stands out among the six major services
offered in the U.S. today. Nextel brings in about $70 per user. That’s because
an overwhelming percentage of its customers are enterprises. And
businesses like to use Nextel because it has something different--its
DirectConnect feature, known more generically as push-to-talk.
DirectConnect is based on two-way pager technology, and allows a
business to communicate with its employees in groups, like a walkie-talkie.
For example, if you were running a trucking business, you could push a
button on your Nextel phone and immediately access all of your employees
who were on the road all over the country. It’s kind of like a wireless
intercom, but with the added benefit of being selective about who hears the
announcements. There’s also a tracking feature, so you could see if
Employee X is spending a little too much time at the rest area just west of
Biloxi.

Companies like AT&T Wireless, Sprint PCS, and Verizon Wireless have said
here that they are testing push-to-talk products too, and hope to actually put
them in the market before the end of 2003. It’s yet another feature in their
efforts to woo higher-paying business customers. Last month, I spoke to
Nextel CEO Tim Donahue (who also happens to be the current chair of
CTIA), about possible competition in a niche that Nextel has thus far
cornered. He wasn’t worried. "A lot of other carriers having been talking
about push-to-talk for years, but I haven’t actually seen a (non-Nextel)
handset that can do it."

Devices, Not Networks
For several years now, the wireless industry has been caught up in a frenzy
about 3G –- the third generation of wireless networks. When obsessing
about this, wireless insiders tend to spew technical jargon that is
incomprehensible to the layman: terms like CDMA 2000, GPRS, and
1xEV-DO. But basically the idea is that as we progress in time, each
generation will be able to handle more wireless data and transmit it faster
than previous generations of technology. 3G was supposed to be the Holy
Grail, the point when wireless devices could display live, streaming video.

This year’s CTIA meeting is a little different. People are talking more about
what handsets can do, not networks. And messaging, which has been
ubiquitous in Europe for a few years now, is finally starting to catch on in the
U.S. Beyond wireless email and messaging, this year’s big theme is
entertainment. More specifically, companies like Sony Ericsson and Nokia
are offering new phone features for photos, music, and games on color
screens. For example, Nokia will offer a device this fall that combines an
MP3 player, FM radio, and phone capabilities. One of Sony Ericsson’s
phones has a mini rubber joystick, which can be used in games. As a
demonstration, Sony Ericsson stuck a Bluetooth chip (another technology
which allows devices that are near each other to communicate) inside a Hot
Wheels car, and set it on a track. By using the joystick, you are able to
maneuver the car -– basically, remote control with a cell phone.

Probably the one feature cell phone vendors are hawking the most is digital
photo capability. We’ve all seen the commercial on TV where a woman
encounters Little Richard and takes a picture with her phone and sends it to
her friend as proof. Most of the cell phone cameras on the market today are
external devices, which are plugged into the phone, just like a headset. But
new models have the camera built right in. The photo resolution is pretty
weak for the most part, but if you’re using the cameras as a fun party trick, it’ll
do. Unfortunately, the most impressive phone I saw today isn’t available in
the U.S. yet. LG InfoComm, a Korean company that is trying to enter the North
American market, has a clamshell phone with the camera built into the
hinge. When you flip it open, the screen can rotate around, so you can use
the phone as a mini camcorder. Skeptics, like myself, wonder if there really
is a strong market demand for things like games on tiny cell phone screens,
and mediocre digital photo quality from a device that is still used primarily for
voice. But companies at CTIA are convinced that today's teenagers (a.k.a
tomorrow's consumers) not only want, but expect applications like these.
And with all the various rebates that wireless carriers are offering these
days, purchasing a new jazzed-up cell phone isn't costly. I could turn in my
old Motorola StarTAC, and upgrade to a new phone complete with
entertainment, and only pay $50 or so. Maybe then cell phone makers could
win this skeptic over.

http://www.fortune.com/fortune/print/0,15935,434708,00.html?
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