When will data change the wireless world?

Wireless companies such as AirTouch Communications and AT&T as well as equipment makers like Nokia and Ericsson are devising strategies to capitalize on the booming demand for accessing information from anywhere.

Having already cut into traditional voice markets with special one-rate pricing and roaming plans, the wireless world now wants a piece of the Net action. Meanwhile, even PC industry giant Microsoft and browser pioneer Netscape Communications are intent on getting into the game, making sure their software plays a role.

But while these companies may have starry-eyed plans for blazing Internet speeds, remote connections to the office, and all-in-one messaging systems that can convert email into voice calls--all through a cell phone or handheld device--industry analysts say they have heard the rhetoric before.

Wireless carriers are expected to make progress in delivering certain types of data this year. But the day when consumers will use their mobile phone or handheld computer to access the Net as they do at their desk remains an elusive proposition.

"Wireless data has been coming so many times it's not even funny--It's kind of the industry joke," said Iain Gillott, a wireless analyst at International Data Corporation. "It's great on paper, it's great in the lab...but we don't have anything yet."

Many wireless communication providers are announcing ambitious plans this week at an industry conference in New Orleans.

For example, Nextel and Netscape will join forces for a wireless data and Net access offering called Nextel Online. Separately, networking equipment provider Cisco Systems and Motorola, a long-time wireless player, said yesterday they will invest $1 billion to develop wireless Internet technologies.

Qualcomm and US West also announced plans to offer a wireless Internet trial this spring.

And software giant Microsoft and British Telecommunications got into the act by rolling out plans for a version of the Windows CE operating system that includes a "microbrowser" for wireless Net surfing.

The move marks Redmond's second dip into the wireless world, building on last year's formation of WirelessKnowledge, a wireless communications joint venture between Microsoft and Qualcomm.

Taken in its totality, one might think the wireless carrier industry is on the cusp of a Net-based nirvana, but to some the promises ring all too familiar. "You've got to separate hype from reality," Gillott said.

Other analysts believe high-level business executives will be willing to pay for advanced mobile data services, but the average consumer may not.

"The only thing people are really looking for is to check their email. It's unlikely that the regular consumer will place that high of a value on surfing the Internet that instantaneously," said Kneko Burney, new market opportunities analyst for Cahners In-Stat Group.

"I don't see the market developing until after 2000, 2001," she said.

There are 66 million mobile phone users in the U.S., according to IDC. But most of them use their phones primarily for voice communications. Carriers are practically drooling over the possible billing options and packages they could offer with data services, and handset makers see a whole new market of devices with added functionality.

Analysts agree the future is bright for wireless data capabilities, but the reality may be further out than company executives hope.

"You're not going to get much demand from consumers unless somebody comes out with a low-price product that appeals to the first-time users, and I don't see that happening now," observed Burney.

Analysts also say many vendors will soon offer data-capable phones and other devices, but wireless carriers won't necessarily support them initially. And smaller carriers are expected to lag behind their larger national competitors.

Standard anyone?
Most wireless data applications today--there are few--use the cellular digital packet data (CDPD) standard, a technology that allows carriers to deliver data over existing cellular switched networks. AT&T Wireless Services is one company that employs the technology.

But analysts say CDPD is available in only certain coverage areas and has limited uses, namely for stock quotes, sports scores, weather information and email--typically with a 160-character cap.

The CDPD standard allows transfers of 19.2 kilobits per second (kbps), while the Global System for Mobile Communications (GSM) standard--which is used widely in Europe, Asia, and to a lesser extent in the United States--allows data transfers of up to 9.6 kbps.

"Those are the maximum rates today," said Weston Henderek, a wireless analyst at GIGA Information Group.

But slower rates haven't deterred some industry players from forging ahead with data plans.

Analysts say alternative standards, such as code division multiple access (CDMA) and time division multiple access (TDMA), will reap data services for wireless providers by the second quarter of this year.

Upgraded flavors of CDMA and TDMA--the transmission standards used by many U.S. wireless voice networks--will soon be available and will offer higher data rates. As a result, industry experts expect data delivery rates of about 64 kbps by the year 2000 and up to 144 kbps (faster than an ISDN line) by 2001.

Also, new third-generation wireless communications standards are expected to increase the data rates carriers are capable of delivering--up to 2 megabits per second (mbps) in some instances. The higher speeds will allow carriers to expand their data services to include Internet access, email, remote network access, and perhaps even video-conferencing.

"Many of these things become possible when you move into third-generation standards, but you won't really start seeing true third-generation data services until 2003," Giga's Henderek said.

Those higher data rates open many possibilities for carriers and handset makers alike.

The sky opens up
"We really see a confluence of these industries," said F. Craig Farrill, vice president of strategic technology for AirTouch. "The computer industry wants wireless connectivity...and the Internet industry wants to reach people on the go, and we want to do all that."

Farrill said he expects AirTouch, which was recently acquired by Vodafone Group, to partner with Internet backbone providers.

"We will be an ISP," he said. "The ISP is the natural way for us to go."

By most accounts, data now accounts for roughly half the traffic on many terrestrial networks, but it represents only a small portion of most wireless network traffic. Currently, 97 percent of AirTouch's business is voice service, according to Farrill.

"It wouldn't surprise me if 30 percent of our business was non-voice in five years," he predicted.

Giga's Henderek said he expects data to account for about 10 percent of traffic on most wireless networks in five years.

Despite the huge market potential, even industry executives admit there are challenges to be faced.

Carriers will become systems integrators more than ever before with data applications, according to Farrill. Typically there are four or five companies involved in delivering a wireless data application as opposed to just two--the service provider and handset maker--with simple voice applications.

Wireless networks also do not have the same reliability rates as their wireline brethren.

Data changes the handset game
The conversion to digital services, including an increasing demand for wireless data applications, is driving the demand for advanced wireless handsets, according to industry executives.

Some 160 million wireless handsets were sold in the world in 1998, with projections calling for about 210 million or 220 million to be sold in 1999, according to Mark McKechnie, wireless equipment analyst for NationsBanc Montgomery Securities.

But while data applications are expected to help increase phone sales, they must not become too complicated to use, executives said at a recent conference in San Francisco.

"A challenge will be adding wireless data and more functionality and still maintaining ease of use," said Ericsson chief executive Bo Dimert.

Many industry executives say the wireless handset market will offer many choices for consumers about which phone style to buy. Phones will be personalized depending on their desired function, they said.

As data demand grows, Internet applications will merge with cellular capabilities, creating a variety of handsets designed for different uses. Some will just be voice phones while others will have larger screens with keyboards for data input, blending handheld PCs and personal digital assistants with the mobile phone.

"We will start to see different devices for different purposes throughout the day," said Kari-Pekka Wilska, president of Nokia?s mobile phone unit. "When you are jogging you don't want a bulky device with you."

A billing bonanza?
In addition to changing the actual look and feel of the handset, industry executives are salivating at the new billing opportunities wireless data will bring.

"There'll be a lot of new billing paradigms," AirTouch's Farrill said. "We will be in the information delivery business. Urgency carries a premium."

Executives anticipate sending voice and time-of-day-sensitive information to users first, with delayed data transfers delivered at a discount. A file could be scheduled for delivery at midnight, or another off-peak time, for a fraction of the price, Farrill said.

The packaging and prepaid models that have done so well in the wireless voice market are likely to carry over to data, he said.

Executives foresee more transparent data applications for the wireless industry. "Data, per se, is not always the data that involves a keyboard," said Fred Kuznik, president of Motorola?s personal communications sector.

Information such as bank account balance transfers or lottery information exemplify data that doesn?t take the form of email, Web browsing, or traditional file transfers, Kuznik said.

Data is expected to increase customers' time on the wireless networks, adding valuable minutes of usage to the average monthly bill. Ericsson's Dimert said studies show a data call is three to six times longer than an average voice call.

As another way to increase customers' minutes of usage, the industry is exploring a broadcast data model, a sort of "push" technology for the wireless world. "There is excitement in this area of broadcast," Kuznik said. "Broadcast will drive more minutes than just people with phones originating calls."