Buiseness Week Article:
Wireless in Cyberspace (int'l edition)
Around the world smart phones, notebooks, and pocket devices are creating a whole new Internet
Shards of china still poke up through a windswept lot in Helsinki, the site of a long-shuttered ceramics factory. It looks bleak, yet for IBM, this is a square kilometer of promised land. Within two years, the U.S. computer giant and its Finnish partners plan to build a $1 billion village and office park that will be rigged for the world's most advanced wireless communications. This is a place where IBM, Nokia, and others can map out what a world of wireless computing and mobility will look like--and live in that world as they build it. Settlers here will no doubt surf the Web on wireless notebooks and watch video clips on their phones. But for IBM, this isn't just mobile entertainment. ''The wireless revolution isn't about staring at your cell-phone screen,'' says Mark F. Bregman, head of a new IBM division dedicated to ''pervasive computing.'' Says Bregman: ''This new world will extend to every strata of the enterprise.''
As most Europeans and Japanese have now heard, the Internet is entering a new phase in its short but dramatic existence. Engineers in the labs of every major computer, telecom, and software company in the world are intent on giving their customers anywhere, anytime access to the Net. Nearly 9 million Japanese and Europeans have already had a taste of this: They can exchange e-mail and surf certain Web sites from their mobile phones. In America and Europe, a smaller number of cell-phone and Palm customers can do the same. But that's roughly the equivalent of glimpsing personal computing's potential through an Apple II, circa 1977. If partnerships among companies like IBM and Nokia bear fruit, the whole rich universe of information technology will be in your palm, and at your ear.
It's not hard to see why so many people are gasping and grasping at wireless technology. The market for mobile digital devices--cell phones and pocket computers--has already rocketed past that for personal computers, and it should top 1 billion users by 2003. As cell phones morph into Web surfers, a vast market opens for all kinds of connected machines that fit into pockets, school satchels, and purses. It is this vision of a continuously connected world that has driven markets gaga. Nokia and NTT DoCoMo are now the most valuable companies in Europe and Japan, while Vodafone AirTouch's $163 billion takeover of Mannesmann ranks as the biggest ever. This merger of Europe's two largest cell-phone operators is predicated on the successful birth of the wireless Internet.
This will not be a miniature version of the Web we already know. In this Web-on-the-go, the electronic application you desire will find you when you need it. That's a major change. In most cases, the wired Web that you use today has no clear idea where you are--unless you tell it. But with mobile-phone services, you communicate by means of base stations whose location is precisely known. You don't need to tell an operator you are in Arkansas. By the same token, providers of wireless Web services will present a view of the Net that is relevant to your location, within 150 meters.
ON THE HOOF. Examples? A commuter may be backed up in traffic on New York's George Washington Bridge, but her phone will already be hunting for a precious parking space on the Upper West Side--reserving and paying for it, too. A teen prowls the local mall and receives an alert every time one of his registered buddies passes within 200 yards. Click enter, the screen says, to meet Joe at Friday's in five minutes. Other mobile apps will relentlessly track down buyers who ask to be tracked. A collector will learn in a flash that a certain Ming Dynasty bowl has come onto the market in Paris. The image will arrive at a fast two megabits per second. Place your thumbprint on the screen for ID, and press enter to bid on the Ming.
This is mobile e-commerce. It has little to do with buying best-selling books or used cars, and everything to do with speed and location, with short requests for information and prompt, relevant replies. These are the trump cards of the mobile Net.
Not everyone in the techno-universe is a convert to this wireless epiphany. The established architecture of the PC universe--big color monitors, ergonomic keyboards, multigigabyte disk drives, oodles of bandwidth on optical fiber--exists for a reason. Indeed, around the world, miles of new fiber are being laid by the minute. Why, when everyone is hollering for picture-perfect 3D graphics, would we want to go back to sketchy images on 2-inch liquid-crystal displays?
Complexity also causes skepticism about wireless. These networks, at some levels, make most other technologies look simple. TV stations blast one transmission of Who Wants to be a Millionaire? to millions of households. The wireless Internet also goes over the airwaves but consists of billions of discrete, two-way communications and transactions. As complexity builds, glitches abound. (Think how many times your mobile connection gets dropped.) As for lightning-fast Net access from your phone, that will all depend on crowds, buildings, and myriad other obstacles. Says Robert Egan, research director for mobile and wireless at Gartner Group Inc.: ''This 2-megabits stuff for the wireless Web is absolute baloney.''
Why, then, does the global info-tech community cling to the notion of rivers of information cascading to and from nearly every consumer on the globe? For one, technoids believe they can overcome most of the challenges. Second, don't underestimate the power of white-knuckled fear. Consider the first iteration of the World Wide Web, the plugged-in version. When it emerged in 1993, it created a whole roster of new superstars. Five years later, the Establishment is still reeling. Everyone from Microsoft Corp. and Merrill Lynch & Co. to mom-and-pop travel agencies and bookstores had to reach some kind of accommodation with the Net.
The sequel to this story--mobility--may be just as disruptive for some, and pose a threat to rulers of the plugged-in Net. To win in the mobile universe, media companies must come up with content that fits on small screens, slips through narrow bandwidth, and doesn't co-exist so well with keyboards and heavy disk drives. Machines, increasingly, must understand spoken commands and be gentle on batteries. Think Palm, not Pentium. Faced with these limitations, applications must be far smarter, and to the point. It's rough work. But winners will win access to 1 billion consumers, while losers are likely to languish, tethered to the wall.
SPENDING SPREE. The idea of a new, greenfield Internet is alluring, and the revenue potential is already on display--in Japan. NTT DoCoMo, which boasts nearly 7 million subscribers to its cellular Internet service, gets 25% higher revenue from its Net surfers than from its plain old cell-phone users. And while portals in the old, wired Internet economy spend fortunes to attract and hold on to their fickle visitors, 75% of DoCoMo's customers stick close to the company's opening screen. That, says Jardine Fleming analyst Jake Lynch, gives DoCoMo unprecedented clout with other companies offering content to mobile Net surfers. ''They can negotiate higher fees for the right to appear on the menu,'' he explains.
As Europe's pricey telecom mergers and recent spectrum auctions in Britain show, companies will pay dearly to be the next DoCoMo. And the spending spree doesn't end at the auction. Vodafone will shell out about $8 billion in Britain to build its Internet-ready network. The global total over five years for all manufacturers could be more than $1 trillion. Some analysts fret that the debt burden on service providers will be overwhelming.
But the cost assumptions on handsets and cellular infrastructure are a moving target. Jardine figures that the cost of building next-generation wireless networks is heading as low as $350 per subscriber--far less than the $1,000 projections circulating one year ago. As more Korean, Japanese, and Taiwanese companies plow into the global equipment market, price competition will increase. And the arrival of a humongous new market in China will bring important new economies of scale to bear. Fancy net-ready cell phones that cost $500 today could be giveaways next year, as the cost of chips and screens plummets and service providers hike their subsidies to manufacturers. How will operators afford that? If the underlying math is right, they'll make back their investments on charges for service, transaction fees, and other Internet-style revenue streams.
As this train gathers speed, practically every tech company has a role to play. Yahoo! Inc. and Ask Jeeves Inc. are designing miniportals, and search site Google a trimmed-down engine for handhelds. AOL is mulling plunging into the wireless Net with a multibillion-dollar bid for a slice of the mobile spectrum. Intel is buying up wireless companies and angling for a chip market for mobile phones and palmtops, one that could reach $20 billion in three years. ''This is a boatload of silicon,'' marvels Intel wireless chief Ronald J. Smith.
Engineers are already delivering bigger, brighter screens on mobile devices (photo gallery). That will ease their entry into the workplace, where the data get a lot denser. Electronic Data Systems Corp. and SAP are toiling around the clock to extend even the burliest enterprise systems out to the coat pockets of far-flung employees. They'll have salesmen who not only check inventories on the run but also dispatch orders and bill at the same moment. Business travelers will punch up plane tickets from an Intranet site on the mobile Web and promptly download an electronic ticket right into the phone. ''Tools like this will be in the hands of everybody,'' says Peter Zencke, a board member at SAP.
When will they be arriving? Depends where you are. The basic system is already up and running in Japan: It's the DoCoMo service called i-mode. This will receive a vital bandwidth boost next year as Japan leads the way into the so-called Third Generation (3G). The target is to deliver 2 megabits per second by 2003.
Europe, just starting on the mobile Net, is struggling with a dial-up service known as Wireless Application Protocol, which downsizes fat, graphics-rich Web pages so they mesh with slender phone displays. Nobody likes the first versions of this protocol--though it is sure to improve over time. Beyond all that, there's a shortage of smart phones and, more important, a dearth of fast and valuable applications. But that situation will also improve as Europe switches to an i-mode-style data standard that will permit users to remain continuously online, ready to receive mailings and new blurbs whenever the phone is on.
America is playing catch-up on the mobile Net. U.S. execs had something akin to a conversion experience while attending the mammoth Telecom 99 fair in Geneva last October. What the Americans saw was an Internet growing beyond their sphere of influence. ''Now, they're spending the necessary money and putting plans into place,'' IBM's Bregman says.
As the wireless Net evolves, some products will disappoint, marquee companies will tank, and services will stall, make strange noises, and go dead--just like the plugged-in Web. But a wave of jammed circuits and fizzled launches can't possibly bring this project down. Like it or not, we are headed toward an information-everywhere society, where an immense portion of the globe, consumers and businesses alike, is always logged on. Benefits abound. Wireless devices attached to medical sensors will place emergency calls to the hospital before the first chest pains set in--and ambulances, using location technology, will know exactly where to go. Building these devices will engage the best minds in the world's best labs. ''There should be enough work for all of us,'' predicts Nokia Chairman Jorma Ollila.
KEEPING TABS. The information-everywhere society has some creepy Big Brother possibilities as well. Philips Electronics has come up with a prototype for a minicomputer that hangs by the doorway. It sends off e-mails to Mom and Dad's cell phones when it picks up signals that the kids, with their phones, are home from school. Such devices are reassuring for parents but point to a trend in which small Net devices, equipped with cameras and microphones, will be popping up all around us. Each will be capable of broadcasting our conversations or indiscretions in real time to a global audience.
Perhaps the more worrisome outgrowth of the wireless Web is the never-ending workday. Cell phones and the Net are already stretching work at both ends. The marriage of the two technologies puts the trend on steroids. Why? Now more than ever, companies live on information and run against the clock. Most of this knowledge resides in the minds of their workers, who are increasingly spread around the globe. So, do ambitious managers mine that information when they need it, or do they wait? That's a no-brainer. And while it's easy to say workers should simply turn off their machines, those that do may well find themselves competing for promotions and bonuses with others who don't.
These issues all merit deep consideration. But for the moment, tech companies on three continents are far too busy scrambling for position in the giant industry taking shape. Early in the process, it appeared that winners and losers might boil down to geography.
Now, however, all the major tech companies are racing to each of the markets. The mobile Internet is shaping up to be a global free-for-all. And even though the regions are pondering diverging standards for the Third Generation, the global companies are now confident they can engineer around differences, selling to a global market. Nokia and SAP run wireless research labs in Japan, while Microsoft is hiring workers by the score for its Swedish joint venture with Ericsson. Texas Instruments, the world leader in digital signal-processing chips for mobile phones, shipped over 200 million chip sets last year--many from plants in Europe.
The battles for this nascent market rage not only from region to region but also among industries. One skirmish has opened, for example, between Microsoft and Nokia. The software giant is anxious to control the operating system of the new machines, while the handset king wants to block them out. This has led Microsoft to take a detour, forging a joint venture with Nokia's nemesis, Ericsson. And taking a page from its controversial Internet strategy, Microsoft is bundling its minibrowsers on Ericsson's phones.
PORTAL COMBAT. At the same time, phone companies such as Vodafone AirTouch lavish billions of dollars on 3G licenses and hundreds of billions to consume competitors. Their goal is to control the portals of the wireless universe. But here they face the champs of the plugged-in world, from Yahoo to AOL. In the end, mobile-phone companies may well buy portals. Or, conversely, AOL may buy its way into the phone business.
Not that all the billion-plus Web-surfing machines will be phones. Matsushita, Sony, and Philips are already at work on a galaxy of wireless Game Boys, MP3 players, even tiny Internet TVs linked to mobile phones. Eventually, they envision cell phones working their way into hundreds of gadgets, just the way clocks and radios do today.
In the U.S., meanwhile, computer companies have their eyes on unwired palmtops. Intel Corp. and IBM have created core business divisions focused on wireless. In an alliance with Microsoft, Hewlett-Packard and Compaq Computer are cranking out a new generation of Pocket PCs that will soon be equipped for Net access. And the leader in this space, Palm Inc., is reinventing itself as a Net device maker. ''We're going to provide Net connectivity to all our users by the end of the year,'' says Palm CEO Carl J. Yankowski. In the process, he says, the Internet will change. ''The Net today isn't friendly to mobile devices, but in time the Net itself will bend.''
And how. Think of it: For the first time in history, hundreds of millions of have-nots, and especially kids, will carry their own Net devices, each of them tailored to their needs and tastes. Cyberspace will never be the same. Oh, sure, the old Web will still grow, moving as it does into multimedia. But players on the sedentary Web are racing for their foothold in the fast-moving one. They know the desktop is nowhere to sit while a revolution's happening outside.
By Stephen Baker in Paris, Neil Gross in New York, and Irene M. Kunii in Tokyo, with Roger O. Crockett in Chicago, and bureau reports |
