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Companies fight over wireless users

Despite the limited size of today's mobile Internet industry, a battle already is brewing over which companies' wireless Web portals will dominate the nascent market.

Despite the limited size of today's mobile Internet industry, a battle already is brewing over which companies' wireless Web portals will dominate the nascent market.

Wireless carriers, major Net portals and a handful of wireless-specific Net companies all are scrambling to be the first thing U.S. consumers see on their mobile phones when wireless Net access takes off.

Industry analysts and company executives believe that, although Internet service providers (ISPs) and start-ups will put up a fight, the 800-pound gorillas of the Net--such as America Online, Yahoo, MSN and Excite--may win the wireless race because of their size, reach and stature with consumers.

The ability to take information, entertainment and e-commerce on the go has many consumers salivating for new "smart phones" and high-speed wireless connections. That same demand has driven many wireless stocks sky high, and has led to a variety of recent deals that underscore the importance many companies are placing on mobile access.

Excite@Home, for example, this week joined the WAP Forum, a wireless standards organization. The company also signed a partnership with Vodafone to deliver mobile content in Britain. Wireless Net company Phone.com, which is developing its own mobile portal, acquired unified messaging firm Onebox.com for $850 million on Monday.

And Microsoft's MSN Mobile 2.0, an updated version of its wireless portal, is expected to launch during the cellular industry's annual trade show in two weeks.

The deals are evidence that the wireless Net market is expected to explode over the next few years. For now, only about one-third of Americans own a mobile phone, few of the handsets are capable of receiving wireless Net transmissions, and even then today's network connections are woefully slow.

Still, many companies are furiously developing wireless Web applications and customizing content for cell phones while striking partnerships worldwide.

The trouble is, cell phone screens don't lend themselves to navigating around the Web with ease. At best, the small screens can display only a short list of links, and typing Web addresses to go to new pages is difficult using the telephone's number pad.

This makes control of that tiny screen space important--and many carriers are doing all they can to make sure they've got their fingerprints squarely on the new portal market.

Sprint PCS, which has been the strongest booster of the "wireless Web" in the United States to date, maintains what is effectively its own portal page as a mandatory start-up screen for its users. It strikes deals with other content providers such as Yahoo, Ameritrade and Amazon to put them on the top of its directory of surfing options.

"PCS has forged content provider relationships with the best (sites)," Sprint spokeswoman Mary Osako said. "We see that as a very important aspect of the wireless Web."

Not all carriers are playing the portal game, however--AirTouch Communications says it allows its subscribers to use whatever start-up page they want.

Analysts aren't bullish on the carriers' prospects of staying on top of the portal market. Wireless phone carriers don't know the content business, while Web companies like Yahoo and MSN already handle consumers' email, online calendars, stock portfolios and other services, the analysts say.

"That's where the value proposition is now, not through the ISP," said Jane Zweig, executive vice president at wireless consulting firm Herschel Shosteck Associates. "The carriers don't want to deal with the reality of becoming just a pipe. But it's inevitable."

That doesn't mean the carriers and the Web giants won't have to work together, however. The limited screen space on cell phones, and the difficulty of navigation, means that the partnerships carriers strike are critical in order to send traffic to the Web portal companies.

The biggest Web companies know that and are trying to strike deals as quickly as they can.

"Microsoft has found out over the years that we're not going to be successful unless we partner with folks," said Brian Riseland, a product manager for Microsoft's MSN. "The phone model is a new thing."

A memo inadvertently sent to CNET News.com recently indicated that Microsoft was negotiating with Sprint and AirTouch Communications to forge closer ties between those carriers and MSN, possibly to be announced at the Wireless 2000 trade show this month. The companies declined to comment on any potential announcements, however.

Other portal powerhouses say the time is right to deploy wireless services, in spite of the limited audience.

"We're going to all this trouble because wireless is exploding," said Rob Wilen, senior director and group manager for wireless at Excite@Home. "There aren't many users today, but you can see where it's going in two or three years. Now is the time to put together the content offerings and gain expertise."

Others agree. According to market research firm The Yankee Group, there will be more than 1 billion mobile phone users by 2003 with about 60 percent capable of receiving wireless Internet.

"We know that this is going to be really big and we really need to be there early just like we were on the PC," said Sadhana Joliet, producer for Yahoo Everywhere, the portal's wireless initiative.

The limited capabilities of the devices present challenges from a design and revenue model perspective.

"Anyone who tells you they know which revenue models will win out doesn't know what they're talking about. There's not going to be a strong banner ad business on three-line WAP phones, no question about it," Wilen said. "It's going to be quite a challenge to build things that will make for a good consumer experience, and we think it'll take time to get it right."

Most analysts believe the top Internet portals also will play a significant role in the wireless world.

"If it's an advertising model where you give content away for free, what you need is scale, and that then favors the incumbents," said Bill Whyman, an Internet strategist at Legg Mason's Precursor Group.

But some say that, until recently, the large portals have moved slowly into the wireless arena, leaving the door cracked for a handful of wireless-specific portals.

"The big established portal players are paying lip service to wireless," said Phillip Redman, associate director of wireless mobile communications at The Yankee Group. "They have been slow to adopt wireless technologies. In some ways they're justified because access to the Internet on a phone today is slow. But they'll have to move quickly in the next year."