Article on wireless in USA,
(meanwhile CNBC talkin Naz bottom will be at 3200 area...)
...
redherring.com
Analyst View: Monetizing the wireless Internet
By Peter C. Friedland
W.R. Hambrecht, April 07, 2000
The kickoff of the wireless Internet game was in June 1999, when wireless Internet software maker Phone.com (Nasdaq: PHCM) went public. The receiver was the market, which responded by running up Phone.com stock 150 percent on its first day of trading. Since then, tremendous hype has surrounded an industry that encompasses two of the hottest buzz words in the stock market today: wireless and Internet.
This euphoria raises a key question: how can companies monetize the wireless Internet? The question is likely to be answered by the viability of four key revenue sources: access revenues, application service revenues, electronic-commerce transactions, and advertising. The companies that are best positioned to garner these revenues will win the wireless Internet game.
ACCESS REVENUES: THE WISPS
Cellular and PCS carriers have assumed the role of the wireless Internet service provider (WISP) to supply customers with access. Wireless carriers such as AT & T (NYSE: T), Bell Atlantic (NYSE: BEL), and Sprint PCS (NYSE: PCS), for instance, offer their traditional wireless voice customers the ability to access the Internet through browser-enabled wireless handsets. Each company has a different pricing plan, but they all include a wireless add-on to the regular wireless voice service. For example, AT & T offers Pocketnet, providing customers with "all-you-can-eat" wireless Internet browsing for an additional $14.99 to $19.99 per month. In contrast, Sprint PCS initially priced Wireless Web as a $9.99 monthly add-on for 50 minutes of browsing, plus 30 cents each additional minute. Whatever the plan, wireless carriers are well-positioned to benefit from the wireless Internet because they control the wireless pipe to the customer, which remains a scarce asset. As wireless Internet services proliferate, they will see a significant increase in the volume of minutes accessed on their networks, which should translate into increased revenues.
Another breed of WISP supplies service to Palm (Nasdaq: PALM) devices, handhelds, and personal digital assistants (PDAs). Most notable are GoAmerica (proposed Nasdaq symbol: GOAM), which plans to price an IPO this week; OmniSky, a joint venture between 3Com (Nasdaq: COMS) and Aether Systems (Nasdaq: AETH); and Palm.net, a unit of Palm. GoAmerica and OmniSky provide wireless Internet access to handheld devices via attached modems. Palm.net provides wireless Internet access to the Palm VII device, which comes equipped with a wireless modem. Pricing for these service plans ranges from as low as $10 per month for a limited amount of kilobytes of information, to $45 to $60 for unlimited service. To provide wireless connectivity, GoAmerica, OmniSky, and Palm.net piggyback on the cellular digital packet data (CDPD) networks of carriers such as AT & T and Bell Atlantic, and Bellsouth (NYSE: BLS)'s Mobitex network. GoAmerica, OmniSky, and Palm.net will see substantial demand for wireless Internet access. This is primarily because most users of handheld devices tend to be business professionals, who likely will be among the early adopters of wireless Internet services.
APPLICATION SERVICE REVENUES: THE WASP
The next revenue model is the wireless application service provider (WASP). WASPs enable businesses to adapt their Internet content and enterprise applications for wireless devices. In addressing this issue, a business has two options: the company can ramp up its in-house IT department and solve its own wireless requirements, or the company can employ the services of a WASP. While the first option might make sense for large companies such as Yahoo (Nasdaq: YHOO), Amazon.com (Nasdaq: AMZN), and America Online (NYSE: AOL) that are willing to devote significant resources to wireless access, the WASP option is quickly gaining a foothold with companies that believe wireless solutions are better left to the experts.
WASPs can enable any application. Current WASP offerings include stock trading, consumer banking, news, e-commerce and access to applications such as Microsoft (Nasdaq: MSFT) Outlook or IBM (NYSE: IBM)'s Lotus Notes. Although varying WASP business models exist, the generic models consist of either hosted or on-site applications. In the hosted model, a WASP hosts a wireless application on servers located either on the WASP premises or at an Internet data center. The on-site WASP model involves placing servers on the customer's premises. Initially, WASPs receive revenue through a combination of hosting, license fees, consulting, and service fees. An exciting part of the WASP model is the potential for recurring subscriber fees or e-commerce transaction fees generated by the end-users of wireless applications.
Public companies in the WASP space include Aether Systems, 724 Solutions (Nasdaq: SVNX), Datalink.net (AMEX: DLK), Smartserv Online (OTC BB: SSOL.OB), Geoworks (Nasdaq: GWRX), and Infowave (Toronto: IW.TO), to name a few. In addition, many private WASPs are emerging throughout Silicon Valley. We believe there should be a huge market for WASPs as Internet portals and businesses race to extend their content and applications to wireless devices.
E-COMMERCE TRANSACTIONS
As wireless access becomes more widespread, we expect to see the same e-commerce boom that we currently are experiencing in the traditional wireline Internet. In particular, we believe that convenience purchases -- such as buying movie tickets or last-minute gifts -- will experience quick uptake through location-based directories such as Go2online (a unit of privately-owned Go2Systems) and shopping services such as Amazon.com.
The most obvious revenue stream is payment to the e-tailer for selling a product or service. Beyond that, we believe a wireless Internet sale will also include transaction fees paid to the WISP for providing the e-tailer an interface for the customer, and to the WASP, for providing the application to complete the transaction.
ADVERTISING
One of the biggest questions surrounding the wireless Internet is how to advertise. This is particularly perplexing because wireless handsets are usually confined to a three- to six-line text display. Not only would an advertisement be difficult to fit into such a small space, but it might be so intrusive that it discourages the customer from using wireless Internet services. Although handheld devices have larger screens with more real estate for advertisements, we believe the potential for traditional Internet advertisement banners is limited. One possibility is that location-intelligent portals could send a wireless customer an advertisement based on the customer's personal preferences and location.
Who's got the edge? Though it is uncertain which revenue stream will ultimately win the wireless Internet game, the best-positioned companies presently are wireless carriers such as Sprint PCS, AT & T, Nextel (Nasdaq: NXTL), and Verizon (the Bell Atlantic joint venture with Vodafone AirTouch). These companies have encouraged their users to sample wireless Internet services. As bandwidth increases, which should enable more services, we expect wireless Internet penetration eventually to surpass 50 percent. The gatekeepers of the wireless Internet traffic occupy an enviable position, poised not only to garner access revenues, but also to take a piece of virtually any service, transaction, or advertisement completed over the wireless Internet. Yet, despite this potential, we do not believe the market has granted sufficient credit in the current valuations of wireless carrier stocks.
As for pure-play wireless Internet stocks like Phone.com, Aether Systems, 724 Solutions, Datalink.net, Smartserv Online, and Geoworks, to name a few, the market has clearly rewarded these stocks with high valuations despite relatively small current revenue streams. However, given the limited supply of pure-play wireless Internet stocks, we expect the strong investor interest in this sector to continue to drive the valuations of these stocks higher. |
