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AOL browses handsets with Nokia

The Internet giant puts itself into the wireless handset game with a licensing agreement to use Nokia's WAP microbrowser.

America Online put itself into the wireless handset game Thursday when it announced a licensing agreement to use Nokia's WAP microbrowser.

The Dulles, Va.-based online giant, a subsidiary of AOL Time Warner, said it intends to work with the Finnish mobile-communications maven to develop and market a Netscape-branded version of a Nokia microbrowser based on WAP (Wireless Application Protocol). Microbrowsers are analogous to browsers on PCs but are meant for Internet-enabled wireless phones.

The agreement is AOL's first foray into the microbrowser market under its Netscape brand, which it gained through the purchase of Netscape Communications in 1998. Financial terms of the multiyear agreement with Nokia were not disclosed.

AOL is effectively hitching itself to Nokia's large audience in the handset market. Nokia holds the leadership position in wireless phones and Internet-enabled wireless phones, according to Cahners In-Stat Group, with up to 35 percent market share.

In the wireless sector, alliances with market leaders may be most important assets companies can have.

Unlike in the PC-based Net, consumers have little to no control over what browser is on their phone. The software, which comes preloaded, is virtually invisible to consumers. Relationships with the giant wireless phone carriers, such as AT&T Wireless or Sprint PCS, determine which software customers use.

In addition, the back-end carrier technology is more critical. AOL's move challenges the dominant position of Openwave Systems, a company formed by the merger of Phone.com and Software.com. According to Cahners analyst Ken Hyers, Openwave has a "lock on the browser market" for phones.

"Internet-enabled wireless phones are the way of the future," Hyers said. "In fact, more subscribers will be accessing the Internet by phone than by the PC in the next couple of years. This market will be a very competitive one."

Hyers said handset shipments should reach 1 billion by September 2002. He added that by the end of 2002, well over 80 percent of wireless phones will have a microbrowser and Internet access. In September 2000, 36 million phones worldwide had Internet access.

"This is helping to jump-start our presence in cell phones and complements what we are doing at Mozilla with Gecko," said a Netscape representative.

Mozilla is a browser whose source code is open and freely available to developers. Netscape opened the source code in an effort to get help in rebuilding it to be more competitive in the browser wars. Gecko is Mozilla's browsing engine, which was intended for Internet appliances and set-top boxes.

Hyers said that although the market is in its infancy, the growth that follows could be tremendous.

"We're at the beginning of the curve on the hockey stick, but after this, boom, we go way up," he said. "If you're going to get into the game, now is the time to do it."

Microsoft also has a microbrowser, dubbed Microsoft Mobile Explorer, which was launched in 1999 and has found its way onto more than 1 million phones in Asia.

The phone browser battles don't provide a direct analogy to the once-bloody fight between Microsoft and Netscape over Web browsing software, however.

Instead, the Nokia deal gives AOL and its Netscape brand a new foothold on the wireless screen. Until now, the browser has been relegated to the same position of one slot among many on a wireless portal screen. On a Sprint phone, for example, a customer can see Yahoo, AOL, Amazon.com and a small e-commerce company with little hierarchical distinction.

But with a branded browser, AOL wins a relationship with the consumer that is much closer to what it has on the PC and other devices, where it is often the brand name associated with the Internet itself. The move also supports the AOL Anywhere strategy to reach beyond traditional PCs and computer networks into the heavily touted areas of wireless communications, traditional broadcast media and Net-enabled devices.

News.com's Paul Festa and Melanie Austria Farmer contributed to this report.